The Roth IRA Trap

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‘Tis the season many start thinking about converting regular IRA accounts into a Roth IRA. After all, unlike the taxable withdrawals out of a regular IRA account, funds coming out of a Roth are completely tax-free after age 59½.

Many individuals have made non-deductible contributions into their regular IRA accounts, thereby resulting in the IRA having a basis. A surprising number of these individuals believe that one can pull the basis out of the IRA and deposit that into a Roth IRA, for a tax-free conversion. Therein lies the trap.

One cannot pick and choose what part of the IRA is being …read more

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