The Risks of Owning Stocks in Your Roth IRA

The Risks of Owning Stocks in Your Roth IRA

Ask Bob: Can I Transfer Money from My IRA to a Roth IRA?

A reader asks if his plan for funding his Roth IRA will pass muster with the IRS.
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Question

I’m 63 next month and retired. I don't have reportable income – W-2, 1099, etc. But I would like to fund my Roth IRA by simply taking the IRS standard minimum deduction of approximately $15,500 for 2021 from my traditional IRA and funding my Roth with $7,000 of this money and put the rest in a cash account. Can I do this? My HR Block rep says yes but I’m nervous about the source of the Roth funding

Answer

You are able to move money from an IRA into a Roth IRA at any point in time independent of your income, says Natalie Briaud Pine, CFP®, managing partner at BRIAUD financial advisors.

“The IRA distribution would be counted on your tax return as ordinary income,” she says. If this IRA distribution is your only income, i.e., you have no other income, you are able to withdraw an amount equal to the standard deduction from your IRA and not pay any taxes. The standard deduction would offset the distribution. Pine notes, “You can move all of your distribution into a Roth IRA as a Roth conversion or you can simply withdraw all of it or any combination of the two.”

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Question

I’m 63 next month and retired. I don't have reportable income – W-2, 1099, etc. But I would like to fund my Roth IRA by simply taking the IRS standard minimum deduction of approximately $15,500 for 2021 from my traditional IRA and funding my Roth with $7,000 of this money and put the rest in a cash account. Can I do this? My HR Block rep says yes but I’m nervous about the source of the Roth funding

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