UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev | Next
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: Roth Conversion Tax Calculation Date: 1/9/1998 9:08 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Greetings, Angieeddy, and welcome.

<<Any idea how to calculate the price I'd have to pay for the privilege of converting my non-deductible IRA to a Roth? I know I get to spread it over 4 years. I just want to know how bad it will hurt at the end of the 4 years.

Some info (if it makes any difference): I opened it 2 years ago and contributed the full amount for Roth '96 and '97. Part of it's in a mutual fund that
promptly lost 20% right after I bought it. The rest is in money market. The net is there are no profits in this account (unless you count the pittance from
the money market) and I've already paid taxes on the contributions.

Is there some formula for figuring how much of what's in the account is taxable? Or is the answer basically "How much is in the account? Send it to us.">>

The quick way is to look at today's market value of the account. From that, subtract your after-tax contribution. The remainder is what will be taxable by claiming one-fourth of that amount over the next four years as income. Example: Today the account is worth $4.5K You contributed $4K in after-tax money. One-fourth of $500 ($4.5K - $4K), or $125 ($500 / 4) will be declared and taxed at your marginal rates in each of the years 1998 through 2001. If you contributed $4K and the account is worth $3K, nothing would be taxable on the conversion. Don't ask me if you can claim a loss on the returns for the next four years, though, because I don't know. :-)

Regards..........Pixy
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
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.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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 "#1 Media Company to Work For" (BusinessInsider 2011)! 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