Jeremy, I have 2000$ in a rollover IRA pre taxed, I’d like to put it in a Roth IRA. Is it worth paying the tax and penalty now? Or do I have a better option?
Hey @Emmett!
Well, moving money from a traditional/rollover/pre-tax IRA to a Roth IRA wouldn’t incur a penalty. But you would have to pay tax on that $2,000 the year you do the rollover. Then it would be in a Roth IRA and tax-free forever.
Generally you would want to wait to do the conversion for a low income year so you don’t add unnecessary tax. You can always leave it in a Rollover IRA and let it grow tax deferred forever. But we’re not talking about a ton of money here, so moving it over to a Roth is likely totally fine.
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Thank you so much for your help! Very much appreciated!! I am going to move it to my Roth IRA and pay the tax now on it to help me max out my 2020 Roth IRA.
Ps. You are a very big inspiration with real insights that has motivated me to learn and act on my FI/RE plan.
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