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Greetings, Robortiz, and welcome. You wrote:

<<Step 1: In January '98, I was able to start my own Roth IRA as well as my wife's. Opening deposits were made with projected 1998 earnings. At the time, I had a litte extra cash, so I opened a traditional IRA for 1997 (no previous IRA existed for her) in her name as well, and took a tax deduction for 1997. I immediately converted the Traditional account for the Mrs. into a Conversion Roth account in her name. Though our marginal tax rate will remain 31% for tax years 1997 and 1998 (so the tax I would have paid on her Traditional opening deposit would be the same dollar amount in 1997 and 1998) I find now at the end of this year our AGI will be well past the $100K threshhold for IRA-to-Roth conversions. So it looks like I have to ask for my money back before the end of the year in order to avoid penalties on the overage to her Roth. Is that right? Earnings from the overage balance through the year have to remain in the old Roth, I think.>>

All you have to do is in writing notify the current Roth IRA custodian that you wish to recharacterize the original conversion as a transfer of one traditional IRA to another traditional IRA. That's all there is to it. All the money to include any earnings since the conversion remain in the account and it will be a traditional IRA. All that happens is the original transaction has been reclassified as a transfer from one traditional IRA to another just as if the conversion to a Roth IRA had never taken place.

<<Step 2: Last year year I had no idea who Fools were, and now I think I are one. After I get the overage refunded (that is in concept canceling the conversion transaction), I could time the refund to come late in the year, hold the cash 'til 1/2/99 or after, then use the funds to start-up the 1999 Roth for the Mrs. in a stock-based account with a brockerage. This should capture, to the extent possible, low fees, earliest deposit and compounding, etc. thoughout 1999. If this looks good to those who see this post, what/how can I do in preparation between now and 12/31 to a)open an account in 1998 (possible?), and b)be prepared to receive funds for the 1999 deposit after New Year?>>

Well, if your AGI will not exceed $100K in 1999, why not just do the conversion again after the new year starts? That "overage" isn't going to be refunded, it's going to be in a traditional IRA.

<<Step 3: On older Traditional IRA I have, originally from a small lum-sum disbursment of 401K from my previous employer, has been eeking out a miserly interest rate at the bank. They won't let me convert it within the bank, so I am thinking of pulling it anyway, for a nice base in a FF brokerage IRA. Anyone have a link to payback tables that can tell me the return I need to gain in the new account to beat the penalty for breaking the banks terms on the deposit? Balance to pull is about $4500.>>

I know of no links that will let you make this comparison, but there's nothing that says you can't do it yourself using a compound interest table. Compare what you would get if the IRA stayed with the bank to what you think the net proceeds would get if you rolled it to another IRA. Just pick several ending periods for the comparison and you can get a very good idea on how long it will take for you to recover the penalty loss.

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