Roth Conversion - Oops!

Roth Conversion - Oops!

By Andy Ives, CFP®, AIF®
IRA Analyst

An advisor called to discuss Roth IRA conversions. His new client made some decisions before speaking with him, and he was trying to untangle her self-inflicted knot. She was 69 years old, a single tax filer, still employed, and had a traditional IRA. Based on advice from her brother (who is not a financial professional), she had already ripped through Roth conversions of $200,000 for both 2021 and 2022. The brother's only consideration in making his recommendation was, "The market is down."

Uh-oh. And now we face the consequences.


Q: When converting an IRA to a Roth IRA, do the investments (stocks, bonds, ETFs, etc.) have to be sold or can they be transferred directly from the IRA into the new Roth account?


Q: My husband is the sole beneficiary of a Traditional IRA owned by his cousin, who recently passed away. From my research, I believe my husband fits the exception criteria of "eligible designated beneficiary" in that he is not more than 10 years younger than the deceased (he is 9 years younger=E2=80=A6he is age 72 and the deceased was age 81). As such, from what I read, he does not have to empty the inherited IRA account within 10 years and can withdraw his RMDs using the stretch IRA method. Can you please confirm this? (I know that for the year of his cousin's death — 2022 - he needs to take whatever RMD she still needed to take=E2=80=A6but after that, it looks like he can stretch his RMDs and does not have to empty the account within 10 years).


Q: My wife (68) inherited a traditional IRA and a Roth from her sister (71) in 2021. Both accounts have been moved to inherited IRAs. I'm trying to do some tax planning. Can you please confirm the following from my confusing research? As an "eligible designated beneficiary," my wife can stretch distributions over her lifetime for both the traditional and Roth IRAs. RMDs are required starting this year from BOTH inherited accounts using the Single Life Expectancy Table for inherited IRAs. Yes?


Q: I have a client where we did a 60-day rollover this past January. The proceeds were put back into the account in less than 60 days. The client has asked me to rollover the 403(b) plan he's had sitting with his former employer. Is this a second rollover violating the once-per-year rollover rule?


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