"gindie" <gindie[at]hotmail.com> wrote:

- quote -

I think you are right. I did post a related question under
a different subject at the same time. I did state that I
was over 59 1/2 in that post. I guess it was a case of not
wanting to repeat the same information in two posts.

--
-Ernie-

"There are only two kinds of computer users -- those who have
suffered a catastrophic hard drive failure, and those who will."
Have you done your backup today?

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

My phrase "I believe you have to come up with the tax out of
your own funds" was indeed from the point of view of someone
under 59 1/2 in order to avoid the 10% penalty. However,
unless I missed something, you did not mention your age in
your original post.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Ernie Klein <ecklein[at]pacbell.net> wrote:
- quote -

There is nothing in the law or regulations that requires the
tax to be paid from outside sources. However, any funds not
deposited in the new Roth IRA would be subject to the 10%
penalty. Since the OP is over 59 1/2, he is not subject to
this penalty. He will pay tax on the entire conversion, so
it doesn't matter if he uses some of the money to pay the
tax. It just reduces the amount in the IRA, with the
consequent impace on future earnings within the fund and the
amount available for future distribution.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"gindie" <gindie[at]hotmail.com> writes:

- quote -

You can do it either way.

However, paying the tax out of the IRA nullifies one
of the main points of converting to a Roth -- the
ability to in effect contribute a bunch more money
(the amount of the taxes) to the IRA.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"gindie" <gindie[at]hotmail.com> wrote:

- quote -

I can't believe that that is true. Maybe for people who are
under 59 1/2, which I am not. I can take a distribution
from my IRA anytime I want, for whatever reason. That
distribution would be mixed with my 'other funds'.

There may be some rule that one can't convert to a Roth and
pay taxes in the same transaction.

You may also be thinking that many advisors suggest that for
most people the tax hit on the IRA, if taxes are paid from
the IRA, negate any benefit gained from the conversion. In
my case, I think there would be a benefit, but it is a trade
off, hence my question to optimize and find the right
balance.

--
-Ernie-

"There are only two kinds of computer users -- those who have
suffered a catastrophic hard drive failure, and those who will."
Have you done your backup today?

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"Also, the tax I pay now reduces the amount that is
invested.."

I don't believe so. I believe you have to come up with the
tax out of your own funds, not from the IRA.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Looking ahead several years to when I have to start taking
mandatory distributions from my rollover IRA's, it looks
like, if I leave everything as it stands now, that the
yearly distributions will bump me into a much higher tax
bracket and the government will take a good deal of my
savings.

I guess that is a good reason to start converting some of
those IRA's into a Roth IRA while my income (and tax
bracket) is fairly low.

Of course the amount I choose to convert each year adds to
my AGI, which also bumps up my bracket.

Also, the tax I pay now reduces the amount that is invested,
which in turn reduces my overall tax free income. I might
pay so much up front tax that it would be better not to
attempt to convert it all to a Roth.

Taking all of this into account looks like a fair amount of
work to come up with the optimum amount to convert each
year.

I have two questions:

Are my assumptions above correct?

Is there any software available that one can plug in 'what
if' scenarios to calculate the optimum amount to convert
each year?

--
-Ernie-

"There are only two kinds of computer users -- those who have
suffered a catastrophic hard drive failure, and those who will."
Have you done your backup today?

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >