On Friday, April 24, 2015 at 3:06:27 PM UTC-4, Leon wrote:
On 4/24/2015 1:13 PM, dadiOH wrote:
DerbyDad03 wrote:
On Thursday, April 23, 2015 at 4:44:58 PM UTC-4, dadiOH wrote:
DerbyDad03 wrote:

To be clear, instead of "replaced within 60 calendars days" I should
have said "deposited into a qualified retirement account held by the
same individual within 60 calendars days".

Since the 60 day rule was put into place to facilitate rollovers,
there is no stipulation that the funds must go back into the same
account they were withdrawn from, they just need to go back into a
qualified retirement account owned by the same individual.

I'm guessing that a Roth IRA doesn't qualify as a "qualified
retirement
account"?


A Roth is a qualified retirement account. If I said something that
made you think otherwise, I apologize.

What made you ask that question?

The business about being able to transfer from one qualified account to
another.

If one can transfer a regular IRA, funded with pre-tax dollars which are
taxable when withdrawn or distributed, to a Roth IRA, which is funded with
post-tax dollars which are NOT taxed when distributed or withdrawn, it seems
to me there is a loop hole. IME, the IRS really frowns on loop holes but if
this exists, I want in on it


If you remove money from a traditional IRA and move it to a Roth IRA you
have to do a "conversion". Essentially the conversion allows you to
move money into a ROTH in excess of amounts normally allowed per year
however the amount converted adds to your yearly income and you pay
taxes on that money and perhaps at a higher rate if the amount puts you
in a higher tax bracket.

http://www.rothira.com/roth-ira-conversion-rules

Another reason to do Roth conversions is to reduce the amount of money in your traditional IRA's so that your RMD will be lower once you reach 70 1/2.

There are Roth conversion calculators that can help determine if paying a little bit more in taxes each year via Roth conversions will result in a smaller long term tax bill. Let's say you are in the the 15% bracket now but projections show that your RMD's will push you into the 25% bracket. It may make sense to do enough of a Roth conversion each year to get yourself to the top of the 15% bracket, reducing the amount in your IRA's so that when you reach 70 1/2 you stay in the 15% bracket even with your RMD income.

Of course, if you are going to Roth conversions for any reason, you should have money to pay the income taxes already available in non-IRA funds. It doesn't make sense to take a gross amount out the IRA, pay the taxes with part of it and convert just the net amount.