There is often confusion about the desire and how to transform into Roth Ira. In this video from the Motley Flower Live Financial Planning series, Dan Kaplinger, a longtime contributor and director of investment planning, discusses some of the finer points of the Roth IRA transformation. Dan Roth talks about the tax effect of conversions, converting multiple accounts at the same time, backdoor Roth conversions and the time limit on accessing money after that conversion is complete.
Dan Kaplinger: Lightning ball, let’s see if I get four here in a minute. Well, it will be difficult.
John says, “If I convert from traditional to Roth, when is the tax due, do I need to worry about the estimated tax payments?” John, it is treated as taxable income at the time you make the conversion, and so you do not collect the tax due until the following 15th April, but you are right that you may have some potential consequences of paying the tax. , You take a look at it. You are eligible for a waiver that prevents you from returning on time and doing so, but you may need to make a small payment before April 15th to avoid penalties.
Mike Merrick asks, “Can you turn both an SEP IRA and another IRA into a single roth?” Yes. You do not need to have multiple Roth accounts as the target for conversion. You can combine them all. Just keep in mind that there are some specifications for tracking purposes that you want to keep separate if you make conversions at different times. But in general, no, there is no need.
Ann asks, “Any advice for someone who wants to contribute to Roth that exceeds the income. Does Backdoor Roth seem complicated?” Yes, it is complicated. But it’s not as difficult as it sounds. If I had a little extra skill in the beginning, I apologize. It’s not that hard, really you have to put money in one account, you wait a week, you tell him to move to another account. It’s not difficult.
Then finally, Brian Kelly says, “If I convert from 401 (k) to Roth, before that period? Is there any time limit for that money to make a penalty if accessed?” Brian Kelly, that’s the five-year rule we talked about a few weeks ago. In the chat, I’ll put a link to the five-year rules we talked about. Take a look there, it will answer your questions.
