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Retirement Rescue FAQ: Are You in These Positions?

Ed Slott and Company has a special microsite just for those who pledged to Public Television during Ed Slott's recent special, Ed Slott's Retirement Rescue!. Below are two questions contained in the FAQ section of the microsite. If you are interested in access to the special site, make sure to contact your local Public Television Station or call in during an airing of Ed Slott's new special.

I am 30 years old and want to convert some of my IRA to a Roth IRA. I know I will have to pay income tax on the amount I convert, but will I also owe the 10% early distribution penalty?

No, you will not owe the penalty. A conversion to a Roth IRA is subject to income tax as you have noted, but it is not subject to the early distribution penalty. Keep in mind that your conversion should be reported on Form 8606, which you should file with your tax return for any year in which you do a conversion.

My wife and I just discovered that the IRA contributions we made in February 2012 for 2011 are not tax-deductible. We would not have made them if we knew we couldn’t get a tax deduction. Since we already filed out taxes, is it too late to get that money back?

No. You and your wife can remove the contributions as if they were excess contributions by withdrawing the contributions plus the attributable earnings by October 15, 2012. The earnings will be taxable to you for 2012. You might also consider recharacterizing the contributions as Roth IRA contributions for 2011, assuming you qualify for Roth contributions.

-Compiled by Jared Trexler


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Thursday's Slott Report Mailbag

Consumers: Send in Your Questions to [email protected]

Can I transfer money from my IRA to my husband's Roth IRA? I am 35, and he is 36.

Thank you!

Gail Clements

No. The only way your IRA funds can be transferred to your husband’s IRA is in a divorce or after your death. Even then, it would have to be transferred to a similar IRA, for example an IRA to IRA or a Roth IRA to another Roth IRA. In this case, you cannot transfer your IRA into your husband’s Roth IRA.