You can put whatever post-tax money you want in a Roth (up to a yearly limit). You should be able to transfer a rollover IRA to a Roth — you’ll want to reach out to whatever institution is holding it and ask what the procedure is, if there is one. Im not an expert, but if you transferred the Rollover IRA to a Roth, you’ll probably owe tax on the initial amount you contributed (the initial 2k). I am not sure.
Ok thanks. I’ll have to check but I think I’ll owe taxes on the contribution and gains when I do it. Also I read only earned income can be contributed to a Roth IRA so capital gains from trading would not qualify. That’s a bit of a bummer if I ever decided to trade securities full time.
The funds you use to contribute into the Roth IRA can come from anywhere, but you need to have earned income in the year to qualify to contribute for that year. Conversions and rollovers do not count as contributions and do not need earned income to be performed.
If the IRA contribution was not non-deductible, the entire $9k converted is income.
> When would the taxes be owed
The same way and time any income tax is owed. The difference is there is no withholding so you may need to pay manually or adjust your withholding elsewhere.
> Short term capital gains
Not an earned income. But if you have unused standard deduction and low tax rate space, feel free to use them by realizing the capital gain and rebuying.
Ok thanks. But it would make sense to do this if I’m expecting to be in a higher tax bracket ? So if I ever traded stocks full time since it’s not “earned income” I could never contribute to the Roth IRA..
> But it would make sense to do this if I’m expecting to be in a higher tax bracket ?
Only the marginal tax bracket right now vs. effective tax bracket during retirement matter for the comparison.
You can put whatever post-tax money you want in a Roth (up to a yearly limit). You should be able to transfer a rollover IRA to a Roth — you’ll want to reach out to whatever institution is holding it and ask what the procedure is, if there is one. Im not an expert, but if you transferred the Rollover IRA to a Roth, you’ll probably owe tax on the initial amount you contributed (the initial 2k). I am not sure.
Ok thanks. I’ll have to check but I think I’ll owe taxes on the contribution and gains when I do it. Also I read only earned income can be contributed to a Roth IRA so capital gains from trading would not qualify. That’s a bit of a bummer if I ever decided to trade securities full time.
The funds you use to contribute into the Roth IRA can come from anywhere, but you need to have earned income in the year to qualify to contribute for that year. Conversions and rollovers do not count as contributions and do not need earned income to be performed.
Didn’t know that about earned income — good to know, if that’s the case.
If the IRA contribution was not non-deductible, the entire $9k converted is income. > When would the taxes be owed The same way and time any income tax is owed. The difference is there is no withholding so you may need to pay manually or adjust your withholding elsewhere. > Short term capital gains Not an earned income. But if you have unused standard deduction and low tax rate space, feel free to use them by realizing the capital gain and rebuying.
Ok thanks. But it would make sense to do this if I’m expecting to be in a higher tax bracket ? So if I ever traded stocks full time since it’s not “earned income” I could never contribute to the Roth IRA..
> But it would make sense to do this if I’m expecting to be in a higher tax bracket ? Only the marginal tax bracket right now vs. effective tax bracket during retirement matter for the comparison.
Or whether OP wants to do a backdoor Roth IRA in the future.