Ok, this has been beat to death, and I thought I knew what was going on, then the Schwab person on the phone made it sound otherwise.
This is the first year I am above income limit for Roth, so 2 days ago I deposited $5500 into my Schwab Traditional IRA (which had a $0 balance previously, now $5500). Goal was to call a few days later (today) and backdoor covert the $5500 to my Roth account (which has $12500 [2 years of contributions + interest])
Woman on the phone says there is tax withholding to convert the traditional IRA to the Roth and the money put into the Roth amounts to about $4900. Is this right? I didn't think there was any tax hit when conversion was made? She seemed VERY adamant that you cannot convert a tax deferred account to a tax free account without paying taxes on the move.
That's question 1.
Question 2 is: this year I rolled all of my previous employers 403/457/401 into a Rollover IRA and Separate Roth account with Fidelity (tied to both old and new employer) that totals around $105k for the funds moved. Will this have impact on Schwab Roth conversion? As an aside, the Roth account at Fidelity has been established simply for the mega-backdoor maneuver through my employer. The standard $5500 individual contributions I make annually are separate and with Schwab.
Any advice on this is much appreciated.
This is the first year I am above income limit for Roth, so 2 days ago I deposited $5500 into my Schwab Traditional IRA (which had a $0 balance previously, now $5500). Goal was to call a few days later (today) and backdoor covert the $5500 to my Roth account (which has $12500 [2 years of contributions + interest])
Woman on the phone says there is tax withholding to convert the traditional IRA to the Roth and the money put into the Roth amounts to about $4900. Is this right? I didn't think there was any tax hit when conversion was made? She seemed VERY adamant that you cannot convert a tax deferred account to a tax free account without paying taxes on the move.
That's question 1.
Question 2 is: this year I rolled all of my previous employers 403/457/401 into a Rollover IRA and Separate Roth account with Fidelity (tied to both old and new employer) that totals around $105k for the funds moved. Will this have impact on Schwab Roth conversion? As an aside, the Roth account at Fidelity has been established simply for the mega-backdoor maneuver through my employer. The standard $5500 individual contributions I make annually are separate and with Schwab.
Any advice on this is much appreciated.
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