Teachers' Deferred Saving Plan to Roth

[Guest gctatter]

Can I rollover my teachers' deferred tax savings plan directly or indirectly to a Roth IRA? If yes, how do I do it? Can I spread the rollover amount over a few years to spread out the taxes due on the rollover to a Roth IRA? Thanks for any direction or assistance you can provide.

[Appleby]

No. The current version of the regulation prohibits the direct rollover of assets from a 403(b) plan to a Roth IRA. You must first roll the assets to your traditional IRA and then convert the assets from your traditional IRA to your Roth IRA.

Remember that your adjusted gross income must be $100,000 or less and your tax filing category must not be “married filing separately, otherwise, you will not be eligible for a Roth IRA conversion.

Contact your financial institution for assistance with establishing a traditional IRA and initiating the direct rollover form your 403(b) account to your Traditional IRA. Also, contact your 403(b) provider regarding their documentation requirement for distributing the assets from the 403(b) account.

Once the assets are credited to your traditional IRA. Contact your financial institution regarding their policies and procedures for converting the assets to a Roth IRA.

The option to spread the taxes over a few years (four years to be exact) was available only to Roth IRA conversions that occurred in 1998. For Roth IRA conversions that occur years 1999 and later, the full amount is taxes in the year the conversion occurs.

More questions?/ Please do not hesitate to post.

[GBurns]

Is your plan a 403(b)? If not, what is it?

[John G]

If you will qualify over many years (teachers salaries?), then you might convert part of the account each year to avoid tax bracket creep. A hybrid of IRA/Roth is often a very practical option as you can let the Roth roll into the future, controlling dispursements on your timing, or even using it as part of your estate.

I am assuming that your are talking about a 403b or a "thrift plan".