|If you have ever made nondeductible IRA contributions, you should start thinking about the lowest-taxed way to get your money out.|
- Convert all IRAs to Roth IRAs and pay taxes on the entire taxable portion. If you have large IRA balances, this may be unacceptable.
- This next fix is completely tax free, but takes some work: If you are working and have a 401(k), or you have a business and can start a 401(k), ask if you can roll over your IRAs into the 401(k). If you can, roll them into the 401(k) minus the basis, which must be left behind in the IRA. Now that the IRA has isolated the nondeductible assets, they can be tax-free converted to a Roth IRA. In the next calendar year, the rollover money from your 401(k) can be rolled back to your IRA (if the employer allows) and you have the best of all worlds.
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