Open topic with navigation

IRA Conversion

The IRA Conversion screen lets IRA account holders convert a Traditional, Rollover or SEP IRA account to an Roth IRA account. This is a full conversion in which all assets in the source IRA account are transferred to the destination Roth IRA account.

IRA Conversion Rules

The following rules and procedures apply to IRA conversions:

• For IRA Conversions from another Custodian/Trustee, you must open an Roth IRA account if you do not already have one.
• For IRA Conversions from a Traditional IRA or Rollover or SEP IRA account, you must open a Roth IRA if you do not already have one.
• If you request a full conversion, your existing Traditional/SEP IRA account will be closed upon completion of the transfer.
• The state of legal residence in which you live must the be same for both the source IRA account and the destination Roth IRA account.
• The trading permissions must be the same in both the source IRA account and the destination Roth IRA account.
• A conversion to a Roth IRA is subject to federal and possibly state income tax withholding, unless you elect not to have withholding apply. You may either elect not to withhold federal income tax or you may elect to withhold at a rate not less than 10%.
• If federal income tax is withheld, state income tax may also be withheld. Where state income tax applies, the rate will be no less than the state's minimum withholding requirement. Your state of residence (the legal address for your IRA account), will determine your state income tax withholding requirement.
  Consult your tax advisor about your tax withholding requirement.
• To qualify for an IRA conversion, the total cash available in your Traditional or SEP IRA account must be greater than the federal tax amount + the state tax amount + 2% of total assets being converted. Stated as an equation, this requirement is:
  Total Cash Available > Federal Tax Amount + State Tax Amount + 2% of total assets being converted
• Transfers of securities positions from a Traditional or SEP IRA to a Roth IRA will only be accepted between accounts with matching names and taxpayer identification numbers.
• Refer to IRS Publication 590, Individual Retirement Arrangements and consult your tax advisor regarding your individual tax situation when deciding to convert.

Who can access the IRA Conversion to a Roth Account page?

You can access this page if you are an IRA User with a Traditional, Rollover or SEP IRA account.

To perform an IRA conversion to an IB Roth IRA account

1. Log into Account Management with the IRA account that you want to convert to a Roth IRA.
2. Click Settings > Account Settings.
3. If you manage or maintain multiple accounts, the Account Selector opens. Search for and select the account whose account alias you want to change.
4. In the Configuration panel, click the Configure (gear) icon for IRA Conversion. The IRA Conversion screen opens.

   

5. Enter the Account ID, Username and Password for the destination Roth IRA account, and then click CONTINUE.

   

6. This screen displays rules for converting your IRA to a Roth IRA as well as your current IRA account Total Equity and Cash Available for Withdrawal. You also have the opportunity to withhold federal and, if applicable, state income taxes.
   • Optionally withhold federal income tax by selecting YES and then entering the percentage of the distribution to withhold. We calculate and display the amount of Total Federal Withholding for you.
   • If you live in a state that has a state income tax, optionally withhold that state income tax by selecting YES and then entering the percentage of the distribution to withhold.
7. Review your IRA conversion information and then click CONTINUE.
8. Click Ok to return to the Account Settings screen.