Some simple questions from a newbie

[Guest MJPK]

My husband and I are both 26 and I am starting to do research and learn about Roth Iras but I have a few questions. My father-in-law started a traditional for my husband a number of years ago but we have not invested in it since we got married three years ago. So here are my questions

1) When you file jointly do you open 1 roth account for both of you or seperate

accounts?

2) If you open seperate accounts can my husband have a roth in addition to the

traditional?

3) I am considering converting my husbands traditional into a roth (about $6000). I know that I will have to pay the taxes on doing that and that it should come out of a seperate account so I am not charged a fee for early withdrawl. If I were to do that, do I pay the taxes right then and there, and how does that work or do I pay the taxes with my income tax.

Can someone please explain the very simple basics of roths I have tried to find these answers online but I cant find them. Thank you for any help you can give me or point me in the right direction of where I can find these answers.

Shell

[david rigby]

Two sources to provide help:

- use the Search feature of this Message Board.

- Call 1-800-TAX-FORM to order your very own copy of Publication 590

[John G]

1. I in Roth IRA stands for individual. You have separate accounts.

2. You can have both Roths and regular IRA accounts. The eligibility is determined each year based upon your income level and filing status. But, the combination of contributions for one person (IRA + Roth) can not exceed the maximum limit for the year (currently $4,000 unless you are over 50 when it bumps up to $4,500).

3. Conversion - don't assume that all conversions make sense. Conversions make the most sense when your income tax rate is low, you live in a state with no income tax, or you expect to be in much higher brackets in the future. Sometimes a partial conversion is better than a full conversion if you can avoid tax bracket creep. (probably not an issue with $6k you mentioned)

The tax owed due to a conversion is just like the taxes owed on any other source of income. You might want to make an estimated payment in the quarter you convert. Your normal witholding may keep you close enough to not worry about the amount until you file, at worse there would be a small charge for underwitholding. Note, you do not want to convert and pay the taxes with your IRA assets.

4. Fee? If you are doing a conversion staying with the same custodian, there are no penalties for early withdrawal. You can also do a direct custodian to custodian transfer to avoid anything looking like a withdrawal. The custodian for your Roth can handle all the details - it usually just take a letter of instruction.

Do read Pub 590 !