Archives for January 2007

For the best site that I’ve found to the Traditional-to-Roth IRA conversion process (and more clear than the IRS instructions), see the Fairmark guide. Reading through it, you can see there are a ton of variables to consider, including evaluating your current situation and predicting future legislation. Here’s a summary of my decision process after reading the guide:

Am I Allowed To Convert?
My main concern was the income limits. No matter if you are single or married, your total combined modified adjusted gross income (MAGI) cannot be over $100,000. The definition of MAGI is pretty confusing – either read Pub 590 or better yet Fairmark again for the details. But one way to lower your MAGI is to make contributions to your employer’s retirement plan (401k, 403b). Making more pre-tax contributions to enable you to convert pre-tax contributions to post-tax contributions may seem a bit paradoxical, but I just see it all as increasing your retirement savings.

Note that the income limits are scheduled to be removed in 2010.

What Types Of IRAs Can I Convert?
You can convert both a SEP-IRA or Traditional IRA into a Roth IRA. You can also convert an old 401k/403b/457 plan from your employer to a Traditional IRA, and then convert that to a Roth IRA if you satisfy all of the conditions. My current Traditional IRA is a mishmash of all three of these – an old Rollover 401k, straight Traditional IRA contributions, and a SEP-IRA.
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