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URL:  http://boards.fool.com/greetings-grayfox35-and-welcome-you-wrote-11445384.aspx

Subject:  Re: Converting from Tradn'l to Roth Date:  10/30/1999  5:34 PM
Author:  TMFPixy Number:  14961 of 76082

Greetings, GrayFox35, and welcome. You wrote:

<<In 1998, I converted as much of my traditional IRA's as I could afford to pay the taxes on to a Roth IRA. I understand the logic of not converting if you have to use Traditional IRA money to pay the taxes on a conversion. However, as one approaches age 70 1/2 and mandatory withdrawls are approaching, then why not withdraw from the Traditional, use whatever money is required to pay the taxes on the withdrawl, and roll the rest into the Roth IRA? It would seem that there is a trade-off as to how many years in advance of mandatory withdrawls that one should begin a systematic rollover from Traditional to Roth.>>

In general, if you have no need for and will not use the money, then a transfer to a Roth may be beneficial. Otherwise, it probably won't. You must run the numbers, though, to be sure.

As to using minimum required withdrawals to fund a Roth, you cannot do that. You must take the withdrawal, and you must pay taxes on it. It cannot be transferred to the Roth at all. Worse, you must take care at that age how you do a conversion. The IRS will deem the first money out of the IRA as MRD money, so part or all of a conversion could be voided if you're not careful.

Let's take an example. Say you have $10K in an IRA from which you must take $2K this tax year. So let's say you decide to convert $2K to a Roth, and do so. Later in the year you take the remaining $8K from your traditional IRA and keep it. You would think the $2K you put in the Roth is legit because your total withdrawal for the year was $10K. The IRS, though, would say the first money taken that year was for the MRD of $2K. That's ineligible for conversion to a Roth, so the $2K placed in the Roth would be disallowed. Ain't that a kick in the pants?!!

Solution: Take and keep the MRD first, then do a conversion.

Regards..Pixy
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