retirement educator advice

[nparra1]

I'M 61 years old and a retired educator interested in withdrawing money from my Traditional IRA and also roll over some money into a Roth IRA. My questions are...

1. Can I roll my traditional IRA into a Roth IRA?

2. If so, what is the tax percentage to withdraw and to roll over?

3. Once my money is in a Roth IRA and have paid taxes on that money, will I be taxed again when I decide to withdraw money again from the Roth IRA?

4. I'm currently in the 22% tax bracket, what tax bracket would I fall under when I file my 2024 taxes if I choose withdraw $80,000 ?

• TIAA will already be taking 10% out, so I would be taxed again at tax time?

5.If I max out my Roth IRA yearly, would I have to pay captial gains on money earned if I withdraw in the future?

5. If I max out my Roth IRA at $8,000 yearly, would I have to pay capital gains on money earned if I withdraw?

[FranklinF]

These are ALL Great Questions.

1. Can I roll over my traditional IRA into a Roth IRA?
    Yes. When you convert from a TRADITIONAL IRA to a ROTH IRA, taxes would be paid on any money
    in the Traditional IRA that would have been taxed when you withdrew it.

2. If so, at what the tax rate will the conversion be taxed? (rephrased question)
    It depends on your income tax bracket and income tax rate anywhere between 10% and 37%.
    Please bear in mind that the money converted is added to your gross income for the tax year.
    Federal income tax rates and brackets 

3. Once my money is in a Roth IRA and have paid taxes on that money, will I be taxed again when I
     decide to withdraw money again from the Roth IRA?

     Roth IRA Distributions are NONTAXBLE (and penalty-free) if they are qualified. In some instances
     you may need to pay taxes and penalties on earnings, such as:

• Being younger than 59 1⁄2, unless an exception applies (please see above) you may be subject
  to  taxes on gains at your ordinary income tax rate and a 10% penalty. 
• If you are older than 59 1/2 years and haven't met the five-year holding requirement, your
  earnings will be subject to taxes but not penalties.

4.  I'm currently in the 22% tax bracket, what tax bracket would I fall under when I file my 2024 taxes
     if I choose withdraw $80,000 ? TIAA will already be taking 10% out, so I would be taxed again at
     tax time?
     Please See answer to question 3.

5. If I max out my Roth IRA yearly, would I have to pay Capital Gains on money earned if I withdraw
     in the future?

     Please see answer to question 3.

6. If I max out my Roth IRA at $8,000 yearly, would I have to pay capital gains on money earned if I
     withdraw?

     Please see answer to question 3.

You may want to consult a Financial Planner or a Tax Professional about SPECIFIC
CASE SCENARIOS. In the mean time, let me help you out with a DIY (Do It Yourself)
approach:
Tax Calculator 2023 


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[marvin2it]

Here's all the basics to consider regarding an IRA conversion:

https://blog.turbotax.intuit.com/taxes-101/taxes-101-ira-conversions-1946/

[VolvoGirl]

@FranklinF   I think the answer to #4 is missing.  

#4 and the 10% withholding from TIAA.  The 10% may not be enough.  

You don't actually pay the tax or the 10% penalty (you pay a 10% early withdrawal penalty if you are under 59 ½). You have taxes withheld like from your paycheck. You still have to enter the whole gross amount (before taxes were withheld) with your other income to figure out the total tax (and it may put you into a higher tax bracket) and then the withholding is subtracted from the total tax to figure your refund or tax due. The Gross amount shows up on 1040 line 4a or 5a and the taxable amount on 4b/5b. The withholding will show up on 1040 line 25b.

It has to break out and show the 10% penalty separately on your return (schedule 2 line 8 which goes to 1040 line 23). Then you get credit for all the withholding taken out on 1040 line 25b.

And by increasing your income you may lose some credits like the EIC. You can lose like up to 50% of it for taxes and penalties for federal and state.