I currently have 2k in a rollover IRA, & have read its best to have a Roth. If I convert, how much do I have to pay in taxes next year? Should I pay it out of pocket or out of the Rollover IRA?
Some facts: 23 yrs old, will contribute $600 to the IRA this year & my AGI is around $32k (I know the amounts are small, but I’m doing the best I can!)
2 comments so far...
You are safely in the 15% tax bracket, so if you roll $2K to the Roth, you would owe $300. It’s best to pay this with after-tax dollars. (You leave more money in the account, it’s not a distribution that triggers a penalty, etc.) By the way, if your goal is to have savings, put that $600 for 2008 directly into the roth.
1- if you still work for the same company you have that 401k with – you can’t roll it anywhere.
2-why on earth would you want to voluntarily lose 25-30% (tax and early withdrawal penalty) by converting it from pre-tax to post tax
3-if you HAVE left the company -just roll it over to a regular IRA – you won’t lose any of the money
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