It’s the process of transferring money from a traditional IRA to a Roth IRA by one of the following methods:
- Same trustee transfer: When your IRAs are held at the same financial institution, you can tell the trustee to transfer an amount from your traditional IRA to your Roth IRA.
- Trustee-to-trustee transfer: When your IRAs are at different financial institutions, you can tell the trustee of your traditional IRA to transfer an amount directly to the trustee of your Roth IRA.
- Rollover: You receive a distribution check from your traditional IRA and within 60 days you contribute the money to a Roth IRA.
The amount withdrawn from your traditional IRA must equal the amount you deposit in your Roth IRA. If taxes were withheld, you must make up the difference or the missing amount will be treated as a taxable distribution and could also be subject to penalties if you are under the age of 59 1/2. Contact your plan trustee to review your tax withholding options.
A conversion to a Roth IRA results in taxation of any untaxed amounts from the traditional IRA. The conversion will be reported on Form 8606, Nondeductible IRAs.
