Secondary menu

Re^2: Roth IRA Conversion in 2010-2011

Submitted by sparksfly2197@s... on 25 July 2006 - 9:37am

I'll try starting this new, and much improved, forum with my last question on the old forum.

Hi Larry,
When you indicate "this year" do you mean 2006, even though it is not an option until 2010? Perhaps all it does is to move up the taxes to this year, and the retirement withdrawal and taxes after retirement would be accurate, but if I remember correctly the taxes can be paid out over the two years, 2010 - 2011 in order to spread the misery. Perhaps I am missing something.

Thanks, Fred

On Fri Jun 23 '06 10:33pm, Laurence Kotlikoff wrote
---------------------------------------------------
>HI FRED, TO MODEL THE CONVERSION, ENTER THE AMOUNT IN YOUR TRADITIONAL IRA AS A TAXABLE SPECIAL RECEIPT OCCURING THIS YEAR AND ALSO AS CONTRIBUTION TO A ROTH IRA OCCURING THIS YEAR. BEST, LARRY
>
>
>On Mon Jun 19 '06 12:19pm, Frederick wrote
>------------------------------------------
>>Larry,

>>Can you suggest how we can enter data in order to model the implications of taking advantage of the opportunity to convert traditional IRAs to Roth IRAs in 2010-2011?

>>Thanks,
>>Fred

‹ Roth 401k
Submitted by Dick Munroe on 25 July 2006 - 11:03am.
1

Fred,

I suspect that Larry meant in the year you can make the conversion when he said "this year". That would be consistent with your ability to make the conversion in 2010 and 2011. I'm not 100% sure how you would split the taxes over two years, but you would probably have to convert half of the amount in 2010 and the other half in 2011 which wouldn't be a completely accurate model of doing it all in 2010, but would be close. I'll let Larry fill in the details if I've gotten anything wrong.

Best,

Dick Munroe

Submitted by sparksfly2197@s... on 28 July 2006 - 2:17pm.
2

I think I did as instructed and taxes are an issue because while the conversion is done in 2010 the tax payment can be done over 2011 and 2012. Maybe be something you can address in an update. I can "eyeball" it, but obviously it would be better if calculated. One related question is whether the existing Traditional IRA needs to be zeroed out or does the software know that the taxable receipt is actually actually a conversion and not new, additional money?

Submitted by Laurence Kotlikoff on 3 August 2006 - 12:58am.
3

Hi Fred,

I didn't really pick up on the fact that you weren't going to convert your traditional IRA to a Roth until 2010 and 2011. Let's say you have X dollars in your IRA that you want to convert in 2010 and Y dollars that you want to convert in 2011. Don't enter either X or Y under retirement account assets. Instead, do a side calculation to determine the amount to which X will grow by 2010 and Y will grow by 2011. Call these values X' and Y'. For 2010 enter a taxable receipt of X' and a contribution to your Roth of X'. For 2011 enter a taxable receipt of Y' and a contribution to your Roth of Y'.

This should do the trick.

best, Larry

Share this