Is it possible to transfer funds in an existing traditional IRA to an existing Roth IRA?

Question

If so, what's the most cost-effective way? I have a Fidelity acct and it doesn't seem like this is possible, but I wanted to ask to to make sure.

Answer 1

Yes, it is called a Roth conversion, and it is a taxable event. The money you put into your Trad IRA was not taxed, so when you convert it to a Roth (which means you will be able to later take the money out tax free), the IRS takes their cut. I'm pretty sure it is taxed as ordinary income for the current tax year. There is definitely no penalty for doing this, but Roth conversions have a 5 year, 10% IRS withdrawal penalty starting at the beginning of the year that you do the conversion. After that, there is still a 10% penalty plus taxes on early withdrawals of the earnings portion of the Roth. For record-keeping purposes, Fidelity will probably keep separate your Roth conversion from your contributory Roth so the IRS can enforce the 5 year rule. They should not charge a fee for the conversion or for having to separate profiles. Talk to a CPA or other tax advisor to make sure it is a tax-smart decision for you.

Answer 2

I don't think you can do this without penalty. Traditional IRA was accumulated before taxes and the Roth IRA was accumulated after Taxes so you would have to pay the penalty and taxes when you pull the money out of the traditional then make your deposit into the Roth based on the limit for the year. I would assume. You can ask Fidelity. They may know a trick or two.

Answer 3

money interior the mutual money and deposit the money in a economic employer account , pay the tax or capitol gains or maybe with you owe the federal and state authorities. Take the money it truly is left interior the account and open a Roth IRA account with the business employer. Your Roth will be FDIC insured. you could call your spouse as beneficiary and the money will move for your spouse tax loose in case some thing occurs to you. also your spouse can open a Roth IRA account in the journey that your spouse is operating even as the account is opened. do not purchase inventory OR different INVESTMENTS including your ROTH IRA. The economic employer is the in elementary words secure position for your mark downs. My husband and that i both have Roth debts on the business employer and we by no skill lost a penny interior the present inventory market crash. We lost each and everything interior the inventory market decline of the early 1990's and we discovered our lesson. putting money interior the inventory market is only as secure as money invested in a Los Vegas slot gadget. in case you could not discover the money for to lose the money do not purchase inventory.

Answer 4

I am not a financial advisor by any means. but will answer this based on what limited knowledge I know because my financial advisor did this for me this year. I had a couple traditional iras with Janus and he did transfer them to Roth IRA's still w/in Janus (in addtion to the yearly max $4k that i contributed for 2006). For my tax return for 2006, I will have to pay taxes for the capital gains on it, but when I withdraw it when I retire, I will not pay taxes. The reason I did this was bc I assume my tax rate now will be alot less than when I retire! ;)

But you might want to talk to a financial advisor, fidelity, and/or your accountant to figure it all out. Also, if you do the transferring now and you have a lot to transfer (meaning alot of taxes to pay on your return) keep in mind you might have to pay estimated taxes by Jan 2007.

Good luck.