Can I transfer my ROTH IRA to a traditional IRA, without penalties?

Forum|Forum|4 years ago
October 4, 2021
2 replies
14 views

I just got a promotion and received a salary increase, I'm no longer eligible to make contributions to my ROTH IRA. Is it possible to convert or transfer my Roth IRA to a traditional one?

TurboTax Live Premier Online

GeorgeDenseff

Level 8

You can convert the ROTH IRA to a traditional IRA at anytime. Contact your bank or brokerage to make the change. That way you can still contribute to an IRA: There are no income limits for contributing to a traditional IRA.

macuser_22

Alumni - Champ

@GeorgeDenseff wrote:

You can convert the ROTH IRA to a traditional IRA at anytime. Contact your bank or brokerage to make the change. That way you can still contribute to an IRA: There are no income limits for contributing to a traditional IRA.

That is not correct. A Traditional IRA is before tax money and yiu can convert that to a after-tax Roth by paying the tax on the amount, but you can never go the other way around. Roth IRA's can never be converted to a Traditional IRA. It is not possible to convert after-tax money to before-tax money.

You can have current year Roth *contributions* recharactorized to a Traditional IRA which is NOT a conversion and only applies to new current years contributions.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

VolvoGirl

Level 15

And why would you even want to convert your existing ROTH IRA to a Traditional IRA? You can leave that alone. For new contribution rules going forward see IRS pub 590A

https://www.irs.gov/pub/irs-pdf/p590a.pdf

fanfare

Level 15

"And why would you even want to "

Because you can get a deduction.

For some, the short term is more important than the long term.

also, there is the challenge of investing two accounts instead of one.

Opus 17

Level 15

@fanfare wrote:

"And why would you even want to "

Because you can get a deduction.

For some, the short term is more important than the long term.

also, there is the challenge of investing two accounts instead of one.

If you have not filed your 2020 tax return and you have an extension, you can recharacterize your 2020 contributions only, up until October 16, 2021. If you are thinking about 2021 contributions, you have until April 15, 2022 to recharacterize them as a traditional IRA (or October 15, 2022 if you get an extension). You can't recharacterize prior year contributions, prior year rollovers, or earnings.

@jazwickler , it is perfectly acceptable to own a Roth IRA even if you are no longer eligible to contribute to it. Roth money has several long term advantages that you should keep in mind, such as when you retire, there is no RMD on a Roth account. Also, since Roth withdrawals are not taxable, they do not increase the tax on your social security benefits like regular IRA withdrawals can.

If you want to consolidate accounts and you have a 401(k) or 403(b) plan at work, you might be able to do a rollover from the Roth IRA into a designated Roth account within your workplace plan. But it still has to be separate from your pre-tax workplace contributions.