I have an old tradition retirement account. I would like to rollover into my Roth IRA.
I understand it will be taxed as income if I rollover a traditional into a Roth. Is the tax taken out of the traditional retirement money or can I pay it separately?
Also, I read that pro rata rule could apply. I tried doing some research on it but I don’t really understand it. Could this affect future rollovers? What are the implications?
Rollover old traditional retirement account into Roth IRA, how could the pro rata rule affect me?
byu/Natural_Note5282 inpersonalfinance
Posted by Natural_Note5282
3 Comments
You don’t have to withhold the taxes at the time of conversion to Roth IRA, and it’s generally best not to.
Are you sure that it’s the best plan to convert now and pay your marginal tax rate on the entire balance?
Pro-rata applies if you’re converting and have some non-deductible dollars and some pre-tax/traditional dollars in your IRA (sum total of all Traditional, Rollover, SEP, and Simple IRA in your name).
Mike Piper had a good [Roth Conversion Deep Dive](https://www.youtube.com/watch?v=Wjbf9KVSG7s) presentation at the 2024 bogleheads conference if you’re considering taxable Roth conversions you should understand the considerations he presents.
You can pay the taxes separately. What tax bracket will it be taxed in?
Why do you want to, essentially, do a Roth conversion?
When I do a conversion, I paid it separately when I filed my taxes.