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Old 08-14-2017, 10:18 AM
 
Location: Straddling two worlds
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Quote:
Originally Posted by bigbear99 View Post
Also note that any conversion to a Roth is taxed at the time of conversion. Future withdrawals are free of tax.
https://www.irs.gov/retirement-plans...-distributions
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Old 08-14-2017, 11:41 AM
 
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Quote:
Originally Posted by Hannah5555 View Post
From IRS https://www.irs.gov/retirement-plans...th-conversions :

Quote:
How do I convert my traditional IRA to a Roth IRA?
You can convert your traditional IRA to a Roth IRA by:
Rollover You receive a distribution from a traditional IRA and contribute it to a Roth IRA within 60 days after the distribution (the distribution check is payable to you);
Trustee-to-trustee transfer You tell the financial institution holding your traditional IRA assets to transfer an amount directly to the trustee of your Roth IRA at a different financial institution (the distributing trustee may achieve this by issuing you a check payable to the new trustee);
Same trustee transfer If your traditional and Roth IRAs are maintained at the same financial institution, you can tell the trustee to transfer an amount from your traditional IRA to your Roth IRA.
A conversion to a Roth IRA results in taxation of any untaxed amounts in the traditional IRA. The conversion is reported on Form 8606, Nondeductible IRAs. See Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), for more information.
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Old 08-14-2017, 11:51 AM
 
Location: Straddling two worlds
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I don't have a regular IRA.
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Old 08-14-2017, 12:03 PM
 
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You are getting a lump sum distribution, right? If so, you can either take the cash, and pay the tax, or roll it into a IRA tax deferred until withdrawal. The IRA can be converted into a Roth, but you will then pay the tax due, followed by withdrawals that are not taxed.
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Old 08-14-2017, 02:55 PM
 
Location: Straddling two worlds
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Okay thanks for the info. I will muddle through.
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Old 08-14-2017, 03:03 PM
 
Location: NYC
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And if you do this at age 63 there would be dire consequences for future Medicare payments, see the other thread for that.
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Old 08-14-2017, 03:39 PM
 
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Quote:
Originally Posted by Hefe View Post
And if you do this at age 63 there would be dire consequences for future Medicare payments, see the other thread for that.
Only for a year. The IRMAA is year by year, using the most recent filed return, which is usually two years ago.

The OP should also be aware of the rules on taxing social security payments above certain income levels. Figuring it out is a bit complicated unless you love spreadsheets like I do.
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Old 08-14-2017, 04:45 PM
 
Location: Straddling two worlds
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Well I don't know about OP but I will be 65 on Wednesday and without another job, my annual income will be $22k.
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Old 08-15-2017, 01:12 PM
 
Location: Philadelphia/South Jersey area
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Quote:
Originally Posted by oldsoldier1976 View Post
correct. I believe that Hannah5555 is talking about taking the "tiny" pension to eventually convert to Roth. If the rules of the pension allow for a buy out, that money can be rolled into an IRA. Once in the IRA and the dust has settled. The t's are crossed and the i's are dotted. Then a Roth conversion can commence from the IRA. Everything hinges on the pension rules though.
this is what I did with my late husbands pension. I took the buyout and turned into an IRA, let that sit until the following tax year then converted it into a ROTH ira with Vanguard. Easy peasy
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Old 08-15-2017, 05:20 PM
 
Location: Central Massachusetts
4,800 posts, read 4,853,880 times
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Quote:
Originally Posted by Hannah5555 View Post
Well I don't know about OP but I will be 65 on Wednesday and without another job, my annual income will be $22k.
So the bottom line here is have the lump sum be rolled into an IRA. When the dust is settled on that roll-over then convert the IRA to Roth. You can do it all or partial at that point so that you do not put yourself into a bigger tax bracket. Look at that and also look into the possibility of re-characterization. This is where if you converted X dollars and you didn't like the result you can reverse it all or any part thereof. I don't want to complicate it but reasons could be the tax hit you take in the conversion. All of the money you convert is counted as income. Try not to go outside your current bracket in doing the conversion. The tax on the money you are converting is paid with money from your pocket. That means you are not using any of the converted money to pay that tax.
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