You can convert all or part of the money from a traditional IRA into a Roth IRA, or even Transfer IRA to Gold. Even if your income exceeds the limits for making contributions to a Roth IRA, you can still make a conversion to Roth, which is sometimes referred to as a clandestine Roth IRA. The amount you convert into a Roth IRA is not subject to the 10% penalty that applies to traditional IRA withdrawals made before your 59-and-a-half birthday. The clandestine Roth strategy can be beneficial if you earn too much to contribute to a Roth IRA or if you have determined that a Transfer IRA to Gold or a Roth IRA is better for your retirement. The RMD you withdraw from a traditional, accrued, SEP or SIMPLE IRA cannot be converted into a Roth IRA nor can it be left in the original account.
It's a technique used by high-income people who exceed the income limits of a Roth IRA to convert their traditional IRA into a Roth IRA. Some taxpayers who are not eligible to deduct IRA contributions use after-tax money to fund a traditional IRA and repay taxes when they withdraw money from the account just to have an IRA. While converting to a Roth IRA may be atypical for some people, many others who earn too much with a typical Roth IRA make a clandestine conversion to a Roth IRA every year. No, there are no limits on the total amount you can transfer from your other retirement account to a Roth IRA.
If you want to convert the assets of your 401 (k) plan or another employer-sponsored plan into a Roth IRA, make sure that the money is transferred directly to the financial institution through a transfer from trustee to trustee. If you make after-tax contributions to a traditional IRA, that is, you contribute funds that are not deductible and are subject to tax that year, these amounts will not be taxed at the time of transfer to the Roth IRA. If you're thinking of using the clandestine Roth IRA strategy, analyze the numbers and consider the tax implications, especially if you're converting the entire balance of a traditional IRA. Another reason is that a clandestine contribution to Roth can mean significant tax savings over the decades, since Roth IRA distributions, unlike traditional IRA distributions, are not subject to taxation.
Converting to a Roth IRA allows you to transfer part or all of your retirement savings from a traditional IRA, an accumulated IRA, a SEP-IRA, a SIMPLE IRA, or a 401 (k) to a Roth IRA. But what if you have another retirement plan? The good news is that you can convert plans such as a 401 (k) or a traditional IRA into a Roth IRA and take advantage of their range of benefits, and now may be a good time to do so. You can convert your eligible retirement assets directly into a Roth IRA without first resorting to cash investments. If the IRA has been funded only by tax-deductible contributions, the full value of the transferred assets will be taxed; however, as with any Roth IRA, if you follow the rules, you should not owe more taxes when you make withdrawals.
Remember that when you transfer an IRA or convert it to a Roth IRA, you'll have to pay taxes on any money in your traditional IRA that isn't taxable.