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After taking many "foolish" steps, one by one, over the last 7 months, I decided (after rolling over an old 403b into a Vanguard Traditional IRA) to CONSIDER/research the possibility of a 2nd rollover of $4,000 from the new Vanguard Traditional IRA to a self-directed Roth ($2,000 for 1998 and $2,000 for 1999). I understand that I would have to pay 10% taxes on this money to do so but no penalty since it would be a rollover. I know I have passed the deadline for having the tax on the "1998 contribution" be spread out over several year.

If I understand you correctly, all of the money in the Vanguard Traditional IRA is there as a result of the 403b rollover, not from any direct IRA contributions. If this is the case, any money in that IRA does not count as IRA contributions, and you can still make $2000 contributions for 1998 and 1999.

As I understand it, if you want to you can convert this rollover IRA to a Roth IRA, pay the tax on the conversion, and still make the 1998 and 1999 $2000 contributions.

Converting from an IRA to a Roth IRA does not count against your IRA contribution limit, though any contributions to the original IRA will. In other words, if you contributed $2000 to your traditional IRA in 1998, and you convert it to a Roth IRA, you have already made your maximum $2000 IRA contribution for 1998, and cannot contribute to the new Roth IRA for 1998. However, if all your money in your traditional IRA is there from a 403b rollover, you can convert that whole thing to a Roth and still make a $2000 contribution for 1998 (and one for 1999).

Unless your income exceeds the legal limit allowed for Roth contributions/conversions, but that's a whole other ball of worms.

- Ted

PS This is as I understand it to be. I'm not a CPA or anything, so make no guarantees as to the veracity of my post.

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