Roth IRA Conversion at IB

S

SideShowBob

Can anyone suggest the best way to convert my traditional IRA (held at IB) to a Roth ira (I already have a Roth IRA held at IB I'd like to merge the rollover into). I know IB won't do it although I keep hoping they'll support this.

I'm assuming I need to do an ACAT to another broker such as Scottrade, Etrade, etc which will handle it, then do another ACAT back.

IB why oh why won't you support this? 2010 is a big year for this since you can defer paying taxes until 2011 and 2012 (although tax rates will likely go up).
 
Quote from SideShowBob:

On this page:

http://www.interactivebrokers.com/en/general/education/faqs/ira.php#11

It says:



This leads me to believe they will not do the conversion, otherwise they would say you can transfer the account and then do the conversion.
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That sounds positively stupid if that's IB's position. I have a traditional IRA at MB Trading and all I had to do was open a Roth IRA and then I tell them to move the assets of the traditional IRA into the Roth.
 
This page makes it quite clear as well. You can't convert a traditional IRA to Roth IRA at IB.

There are three (3) conversion methods available. The first, a conversion that takes place within the same trustee known as a “Roth Conversion” is not offered by IB.

The other two methods involve rollovers or transfers.
 
Maybe they will reconsider, apparently starting in 2010 you do not need to convert from a 401k to a traditional IRA first, then to a roth, you can go from a 401k directly to a roth.

Would IB maybe allow you to transfer the money and fill out the forms yourself?
 
Quote from DirkDigler:

This page makes it quite clear as well. You can't convert a traditional IRA to Roth IRA at IB.

There are three (3) conversion methods available. The first, a conversion that takes place within the same trustee known as a “Roth Conversion” is not offered by IB.

The other two methods involve rollovers or transfers.
More...

However I do note that page says:

1. Rollover: You can receive a distribution from a traditional IRA and roll the funds over (contribute it) to a Roth IRA within 60 days after the distribution.

[In Funds Management, choose the following deposit methods: Check, Wire or Automated Clearing House (A.C.H.).]

I.B. Roth IRA owners should be directed to choose "IRA Rollover" on the deposit notification. This selection properly designates the deposit as a "conversion contribution" with the IRS, provided that the funds originated from a traditional IRA. (I.B. is unable to internally transfer funds from a traditional IRA into a Roth IRA.)
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This leads me to believe they would cut a check for funds from a traditional IRA account held at IB to a third party account (say my checking account) and I'd then make a deposit to my Roth IRA account held at IB (from my checking account). The withdrawal would be treated as a distribution and you would be taxed but since you converted to a Roth you expect to be taxed -- you just need to file the appropriate tax forms to prevent being penalized as an early distribution. Although I want to run this by them before I move any cash.
 
From IB's customer service:

Please be advised that IB is in the process of allowing internal Roth conversions and the process should be operational in the early part of 2010.
 
While it's accurate that we have historically not provided account holders the ability to recharacterize IRA account types (e.g. from Traditional to Roth), we will be accommodating such requests in recognition of the changes to the Roth IRA eligibility rules going into effect in 2010.

Please note, however, that the programming changes necessary to provide this functionality will not be available on Jan 1, 2010, but hopefully by the end of the month.
 
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