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I am thinking about taking the funds I have now in a non-deductable IRA account and converting them to a Roth IRA account at a different institution. The nice person at Ameritrade said that I would have to deposit the funds from my existing IRA into a new traditional IRA account at Ameritrade - then request to convert them to a Roth. Whew! The mind boggles at the paper work to do that.

So, I have somewhat resolved myself to that, but I am concerned about the mechanics. I've been told that I can either request Ameritrade to have the funds transfered from my old account, which would take weeks, or that I could request my funds by check which I then would have to deposit within 60 days.

My girlfriend understands that if it's not a direct transfer, if I ever receive a check, that I would then have to pay a penalty.

What is the correct gouge? I'd like to make this happen as quickly as possible and the second scenario seems most efficient.

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No. of Recommendations: 1
The usual good reason for doing 'direct transfer' of IRA funds rather than receiving the funds and delivering them to the new place within 60 days is because in the latter case the firm paying the monies to you is required to withhold taxes. In the direct-transfer method the witholding of taxes is not required. The method suggested by the Ameritrade person should work fine. Provided the funds are already in a traditional IRA I don't believe that it should be necessary for the intermediate step that Ameritrade requires of them setting it up first as a traditional IRA and then later doing the roth conversion. But I do see lots of advantages to doing it the way they suggest. #1 is that if you find later that you want or need to do a 'Recharacterization' that the funds stay at Ameritrade which is what you probably would want. #2 is that the conversion is between your accounts at the single firm and things are less likely to go wrong. And if they do go wrong then you only have to deal with the one firm and not both. puff99
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