I’m currently trying to figure out how to convert my traditional IRA to a ROTH IRA. The only reason I contributed to a traditional IRA for the last two years was because I thought each year my income would exceed the income limits for a ROTH IRA.
Well, it turns out the income limits for a traditional IRA are lower than those for a ROTH contribution. Thus, I’ve invested $10,000 into a traditional IRA for the last two years and put post-tax money into the account, and will be paying tax when I retire later in life and take the money out of the account. I think that’s probably a bad idea, so I want to convert the $10k to a Roth.
The question I have is… how do I do that? Sharebuilder has a form for this, but it seems to assume you put the funds in pre-tax. I’ve heard if you paid tax of money in the account already, then you only will have to pay tax on the interest in a conversion. Given I still have 30+ years before retirement, it probably makes sense to convert the funds now, especially if I only have to pay tax on the $1k.
Do any of you out there in cyberland know how I can do this without paying tax on the entire $11k in this account?