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Re: 529

Andrew,

Interesting point. If my traditional IRA is worth 150000, and I have been contributing for sometime, with a nondeductible basis of 30000, can I not just designate 30000 to converto to ROTH this year? Is it not that simple? then i would avoid paying taxes because i have already done so?

Zip Code: 10020

Re: 529

Unfortunately, the Roth conversion rules do not work like that. The value of your post-tax IRA contributions needs to be allocated evenly over all of your IRA money. So with $30k of basis and $150k of IRA value, you'll shield 20 percent of each dollar converted from taxes, and pay taxes on 80 percent of the converted amount.

Check out the Form 8606 to see what I'm talking about:

http://www.irs.gov/pub/irs-pdf/f8606.pdf

Zip Code: 01801

Re: 529

And please call me Andrew.

Zip Code: 01801