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Roth Conversion and 72t

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ByRon Mexico

L1: Roth Conversion and 72tMy client wants to do a Roth Conversion and 72t at the same time for the next five years. I assume (dangerous word) that he can just set up one account for his conversions and another for his SEPP. Any suggestions or warnings?2005-12-09 10:45, By: Ron Mexico, IP: [68.215.225.250]
L2: Roth Conversion and 72tHello Ron:
There are at least two issues/questions here:
1. Can a Roth IRA be included in the universe of IRAs used to support a SEPP plan? YES.
2. Can a regular IRA which is part of the IRA universe of a SEPP plan be converted to a Roth IRA after the SEPP plan has commenced? NO to unsure; I would have to do a lot of research to answer this question.
Which of the 2 are you contemplating? Or is it a 3rd situation?
TheBadger
wjstecker@wispertel.net
2005-12-09 11:02, By: TheBadger, IP: [66.250.23.21]

L2: Roth Conversion and 72tThank you for your help.
Ideally what we would do is:
1.Consolidateall thecurrent Trad. IRAs into two different Trad. IRAs.
2. Use one of the two Trad. IRAs to convert those funds into a Roth IRA over the next five or soyears (no SEPP distributions from the Roth).
3. Use the other Trad. IRA forSEPP distributions from now until 59 1/2 (currently age 52).
Thanks again. Hope this makes sense (literally and conceptually).2005-12-09 12:03, By: Ron Mexico, IP: [68.215.225.250]

L2: Roth Conversion and 72tHello Ron;
No problem as you have described it. Your 5329 reporting will get a little complex, but that is easy to solve.
TheBadger
wjstecker@wispertel.net
2005-12-09 12:49, By: TheBadger, IP: [66.250.23.21]

L2: Roth Conversion and 72tRon:
I have read and re-read your post and Bill’s replies, and I’m not clear on one point. Do you intend to use both the Traditional IRA and the Roth Conversion IRAs as your total SEPP universe, or just use the one Traditional IRA as a stand-alone SEPP? Please clarify.
If you intend to use all IRAs as the SEPP universe then I think the reporting could get interesting as Bill indicated, especially with Roth Conversions covering several years. Each year you make a Roth Conversion starts a unique 5-year period for that converted IRA. The IRS doesn’t require account segregation like they did in 1998 when the Roth first hit the street, but it might be something to consider since you are planning conversions over several years. Otherwise the accounting could get pretty complicated when the Roth IRA spending begins in the future.
Just some thoughts.
Jim2005-12-12 09:34, By: Jim, IP: [70.184.1.35]

L2: Roth Conversion and 72tFor SEPP purposes, the universe of IRAs would include only the IRA (or IRAs depending on how he chooses to invest) that are not being converted to a Roth, nor would he usehis newRoth.
Any IRA(s) related to the Roth conversion would be kept seperate from the SEPP plan.
I’m sure glad there are folks out there smarter than I who would make sure to consider that aspect though. Thanks.2005-12-12 10:25, By: Ron Mexico, IP: [68.218.105.190]

L2: Roth Conversion and 72tRon:
Thanks for clarifying the elements of your SEPP universe. From your answer I would say your life and that of your client just became infinitely simplier.
Good luck.
Jim2005-12-12 10:29, By: Jim, IP: [70.184.1.35]

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