No. of Recommendations: 0
1. Am I going to have to pay any taxes on the $2K Roth IRA Conversion by prorating the $2K
non-deductible account with the $20K deductible account that already existed? In other words, is
90% of that conversion
actually taxable, even though it was from a non-deductible account?



The $2K you "converted" to a Conversion Roth IRA is non-deductible--you need to pay taxes. If you took it as a deduction since you started it out as a Traditional IRA, then you have to pay that deduction back to Uncle Sam. Since you started the Roth early, you can spread those taxes out over the next 4 years equally or just pay it all off on your 1998 Tax Return.



2. The Roth IRA account is actually identified as a Conversion account in title. Does this carry any
significance or implications that should make me think twice about adding "new money" to the
account? In other words, do I need to open another regular Roth IRA to fund with "new money"?


For right now, a Conversion IRA is a separate, "closed" account once made meaning that you cannot contribute to it, but must start a SEPARATE CONTRIBUTORY Roth IRA for further contributions. You shouldn't have gone through that "Conversion" process, basically--but I hear there is legislation under way to allow us to meld the converion Roths and Contributory Roths into one account--so be patient and it will all work out--but don't forget to pay Uncle Sam his due!!

Hope this helps!

Mac
Print the post  

Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement