Move allocation from self directed IRA to self dir ROTH issues?

[Amanda G.]

Hi All,

I have both a self directed traditional IRA and Roth IRA. I'm wondering if it is possible for my annual contribution to move assets from the traditional to the Roth rather than contributing new money to the Roth. Does that work? If so, what are the steps?

[Brian Eastman]

@Amanda G.

A contribution is when you add new funds directly to the Roth IRA. This event is limited to cash in the amount of $5,500 if you are under age 50 or $6,500 if you are age 50 or older.

What you are discussing is referred to as a Roth conversion.  This is separate from a contribution, so you could do either or both in a given tax year.  There is no limit on the amount you convert from tax-deferred (traditional) tax status to Roth.  The amount you convert will be considered taxable income.

The process of converting an asset in-kind can be somewhat complex and take some time.  If you want to get that done in the 2018 tax year you will need to move very quickly.  Discuss the process with your plan provider.  It would be wise to discuss the topic in general with your licensed tax advisor.