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Author: FoolAndHisMony Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121185  
Subject: Roth IRA Rollover from Pension Fund Date: 3/10/1998 8:41 PM
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I can't seem to find an answer to this one anywhere - How are pension fund rollovers into Roth IRA's handled when the entire proceeds consist of employer contributions and growth on those contributions ? My assumtion is that it is all taxable as ordinary income and can be spread over 4 years if done in '98, is this true ? (I was hoping for a different answer...) If this is a significant amount of money does it make sense to roll it over (into a self-directed Roth) or leave it be ?
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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2592 of 121185
Subject: Re: Roth IRA Rollover from Pension Fund Date: 3/11/1998 11:04 AM
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[[I can't seem to find an answer to this one anywhere - How are pension fund rollovers into Roth
IRA's handled when the entire proceeds consist of employer contributions and growth on those
contributions ? My assumtion is that it is all taxable as ordinary income and can be spread over 4
years if done in '98, is this true ?]]

True...with a few assumptions.

First, for a qualified plan, you must first roll over these funds into a regular IRA rollover account. And you can generally only do this when you leave your current employment.

Once you are in the IRA rollover account, if you qualify, you can then convert the IRA account to a Roth IRA account.

Based upon your example, and assuming that you qualify and make the rollover in 1998, all of your rollover income would be considered taxable at ordinary rates, but would be spread out over the 4-year period that you note.

[[ (I was hoping for a different answer...) If this is a significant
amount of money does it make sense to roll it over (into a self-directed Roth) or leave it be ?]]

Again, you may not even have that option at this point in time. But if you do, only YOU can see if it makes sense for you.

For additional information on Roth IRA issues, check out my post on the Roth IRA in the Taxes FAQ area.

TMF Taxes
Roy

SPECIAL NOTE: I try to answer as many questions as I can each week, and I generally select those that have not been asked before. If you don't get a detailed answer to your question, it is probably because my time is so limited during tax season, or because it has already been asked and answered in this folder in the past, or because it has been discussed in the Taxes Frequently Asked Questions area. In order to visit the Taxes FAQ area, go to the Fool's School area (http://www.fool.com/school.htm) and check out "Other Features" in the list box, OR you can jump directly to the Taxes FAQ area (http://www.fool.com/school/taxes/taxes.htm). Additionally, if any references were made to the IRS Web Site, you can get there by pointing your web browser to (http://www.irs.ustreas.gov)


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