Jump to content

Conversions/Recharacterizations


Recommended Posts

If an employee converts his SEP/SARSEP/SIMPLE into a Roth IRA, then learns that he has a failed conversion and wants to recharacterize, do the assets go back into the original IRA type or are they recharacterized into a traditional IRA?

Link to comment
Share on other sites

Either is acceptable, i.e. the original IRA type or a traditional IRA.

If the assets were converted from a 'conduit'/rollover IRA (i.e. an IRA that holds assets distributed from a qualified plan) it may better suit the individual to recharacterize the amount to the conduit IRA. Of course, retaining the conduit status only affects individual whose qualified plan balance include balances that accrued before 1974 and individuals born before 1936.

Another factor you may consider is fees. For instance, an IRA Custodian may charge a higher fee for a SEP or SIMPLE than it would for a regular IRA. If the individual has no reason for maintaining the SEP or SIMPLE, such as for receiving future SEP or SIMPLE contributions, and the fees for a regular IRA is less, then it would be more practical to move the assets to a regular IRA.

Appleby

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...