SoonToRetire wrote: Mon Oct 06, 2025 6:37 am
Hello MoneyIsTime,I just found this thread just in time as I prepare to go through this process for the first time, so thank you very much for the steps outlined.
I do have one question and/or clarification to ask about, that is probably quite a simple one, but want to be clear in my understanding:
In step #1, can you outline what you mean by “Move $100k”? That is, on my traditional IRA I see a “Transact” next to each of the funds I hold in the traditional IRA brokerage account – is this what you are referring to:
Transact -> Sell
And once you Sell from whichever funds for the amount you want to convert, the sale proceeds will show up in the Settlement Fund of the traditional IRA account as per your comments, and once there, one can then start the Roth Conversion as you have outlined it?
Thank you very much for your response (or anyone else that does),
SoonToRetire
MoneyIsTime wrote: Wed Nov 27, 2024 5:44 pm
Update to share with all.I did my Roth conversion and had a few added details. It seemed to work WELL! User “Stinky” had a good process typed up using Vanguard (that’s who I have also). I’ve talked to Stinky and asked if I could comment. They agreed. Below are my comments inserted into their typed up process and marked as such.
Kind of yes.
But you do not have to sell to move your assets. If you’re in a stock or fund, you can simply ask your broker to move it from your IRA to your taxable brokerage account, “in kind.”
That means that the shares show up in the taxable account the next day, which will trigger a taxable event. So then you need to know where any cash for a conversion is coming from. Ideally you would have cash already, so the shares you move can stay invested at the full value.
If you don’t have the cash to pay the taxes, yes, you’d sell some of the shares to create cash for the estimated tax bill.
Workflow:
I’m a Vanguard user. Here’s the process I’ve used with Vanguard within the last month. Let’s assume that you want to convert $100,000, with $25,000 of taxes withheld:
1. Move $100,000 into your traditional IRA settlement fund, if it’s not already there.
Comments: This will take 2 business days. The fund balance you’re converting MUST show up in the “Settlement fund section”. If it’s in the “Total credits and debits” it’s not good enough, and you need to wait (2 biz days) until it settles.
A note about doing the conversion process in Vanguard forms. You can, and should, click the “Save” button as you proceed because the forms have a timeout limit. Also, if you leave the process, saving will allow you to come back to it where you left off.
To find a saved Vanguard form in process, go here:
At top right, click
> documents
> forms and applications
Next screen, right hand column, click:
> FORMS IN PROGRESS – Access forms you have started and saved
Next screen, at bottom, click:
> I accept
2. Start the Roth conversion process at this link. Make sure that you read carefully, because about 2-3 screens in, at the bottom of the page, Vanguard will direct you to a new page if you want to have taxes withheld (which you do). https://personal1.vanguard.com/ii8-reti … conversion
Comments: Alternatively just search Vanguard for “Roth conversion” and use that page, it’s the same URL. Like mentioned, about 2-3 screens in, make sure to click at Vanguard on “To withhold federal income tax as part of the conversion, you must complete a separate process.”. Click on the words “complete a separate process”
3. Walk through the Roth conversion process, which takes you through a DocuSign-type process, including filling out a Federal withholding form.
Comments: Withholding amounts are only done in whole percents (like 16%, not 16.2%). You cannot use dollar amounts for Federal but looks like you can specify a dollar amount for my state (WI).
During this process you’ll click and decide on questions for:
-All or part of your account to convert.
-Specify settlement fund and dollar amount to convert.
After the DocuSign process was submitted, I received message that said “We have received your completed Roth IRA Conversion form from DocuSign and have begun processing your request….” in my Vang inbox. Mine took 1 business day to convert.
4. When the conversion is done (for me it was the next business day), you’ll see that $100,000 has left your traditional IRA settlement fund, and $75,000 has appeared in your Roth IRA settlement fund. So your Roth conversion is complete.
5. Now, to “top up” your Roth IRA for the $25,000 of taxes withheld, go to your Roth IRA account on your “accounts” page. Click on “transact” at the right side of the screen, right below the amount in your Roth IRA. Under “transact”, click “Contribute to IRA”. At the very top of the next screen, it will ask you “Is this a rollover from an employer-sponsored plan or IRA?” Click the “yes” radio button, and also say it’s a conversion from a non-roth IRA. Then click on the mutual fund you wish to purchase, input the amount, and choose the funding source (for me it is my linked bank account). Follow the process through to the conclusion.
Comments:
My purchase in the below screen of the “500 Index Admiral” (aka VFIAX) appeared to occur the next business day at opening. For example, if I bought 45 shares of VFIAX for $25k, 45 more shares were in my Roth holdings list on the next business day. This is even though Vanguard says there’s a 7 day hold on my ACH transfer from my bank. So Vang appears to be “nice” and invest you right away while waiting for this 7 days. My bank was already on file with Vang an used in previous transactions, so this 7 day nice-ness might not work if you’re adding a new bank during this transaction.
Here is the screen you fill out and what to click
6. You’ll see $25,000 withdrawn from your bank account, and it will appear in your Roth IRA settlement account.
So at the end of this two step process, you’ll have $100,000 less in your traditional IRA, $100,000 more in your Roth IRA, $25,000 less in your checking account, and $25,000 of tax withholding that will be sent to Uncle Sam.
It’s my understanding that you have 60 days to complete step 5 after steps 1-4 are done. (But I usually do step 5 within a day or two, just so I odn’t forget to do it.) And you can do this as many times as you want, since the “once per year” rule for indirect rollovers doesn’t apply to Roth conversions.
That’s my experience as a Vanguard user. Post back with questions.
Comments: The process worked well. Only time will tell if the IRS has any problems with it. However, I think it should be fine since I talked to 2 Vanguard reps that sounded knowledgeable of the process and both said this was “the way to do it”.
Thanks again to the BH forum and Stinky for the excellent advice and knowledge.
