Hello,I have recently run into an issue and was hoping for some clarification on my situation and potential option. I recently discovered that we will be above the income limit to contribute to a Roth IRA this year due to a severance pay-out that my wife received. Thus far in 2013, I have contributed $3500 into a Roth IRA that I have had for several years, with the original plan of contributing the maximum of $5500. I had been reading about options, and it looks as though there is the 'back-door' Roth contribution option of recharacterisation as a non-deductible traditional IRA (tIRA) and conversion back to a Roth IRA after 30 days. However, recently I came across statements that this is complicated when the person already has a traditional IRA - I have a rollover IRA from a previous retirement account with ~$25000 in it.From my understanding, I would need to recharacterise my Roth contributions and earnings from 2013 into a non-deductible tIRA before the 2013 tax filing deadline to avoid a 6% penalty from the IRS. If I then wanted to convert the contributions / earnings, these would be combined into a 'pot' with my deductible rollover IRA and the amount from each in a conversion would be based on the relative amounts of each. For example, if my combined amount in the non-deductible tIRA and the deductible rollover IRA were $30000 of which $5000 came from the recharacterisation, and I initiated a conversion of $5000, I would need to pay 2013 federal and state income tax on $4167 (as only 1/6 of the 'pot' was post-tax money). A few questions related to this:- Are my assumptions above correct?- Are there any maximum income restrictions for performing such a recharacterisation?- Are there any other options / considerations of which I'm unaware?- Are there any benefits / concerns around the recharacterisation into a non-deductible tIRA?I appreciate any feedback. I've tried reading up on this issue from various sources, but they are usually extremely high-level or fine-detailed around a specific use case. In general, I see very little value in a non-deductible tIRA, which is why I would want to convert this money, but that may be due to my ignorance on the non-deductible tIRA.Thanks in advance.
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