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Author: PMcMullenCT Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: Roth conversion complicated by other factors Date: 2/24/2001 1:59 PM
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You also forgot to take into account the "penalty" on the 403b. When you take the loan and pay it back, you are using after-tax dollars to put the money back in. Once you retire and withdraw this money, you will once again pay taxes on the money you put back in. So you are going to be paying taxes twice on monies used to convert the IRA.

It's not double taxation. You do NOT pay income tax when you borrow pre-tax money from a tax deferred account. Your loan payments are not contributions, you are simply replacing these not-yet-taxed dollars. When you retire, you must then pay taxes on these dollars when you make withdrawals, but these dollars, and their earnings will be taxed only once.
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