Can I deposit my securities into a Roth IRA rather than a T.O.D. election?
I am 75 years old and have invested my own money in the market over the past couple of years. Can I take these securities and open/put them in a Roth IRA? I'd rather do this than do a T.O.D. election.
First off, you can only contribute cash to a Roth IRA, and secondarily you can only contribute to a Roth IRA if you have earned income depending on if you are still working. The maximum amount of Roth IRA contributions is $6500, unless you are under 50 years of age which would be $5500. Although you may do a Roth IRA conversion of securities only if those assets are in an existing traditional IRA.
Not sure what reference you are making to a TOD election because your IRA will pass to your designated beneficiaries listed on your IRA account without probate.
A Transfer on Death (TOD) account enables an account owner to name beneficiaries on their personal (non-retirement plan) investment accounts. A TOD account avoids probate, as well, at the owner's death.
In order to make Roth IRA contributions you need to have earned income. However, I do not quite understand the reasoning for wanting to take the assets out of the Transfer on Death account and move to Roth IRA. Typically you would be looking to convert traditinal IRA or 401(k) plan assets over to a Roth IRA, not non retirement assets.
It would be helpful if you could explain more about what you are trying to accomplish.
Best of luck,
This is a great question, thank you for asking it.
Unfortunately there are a few things tha may be fundamentally preventing you from being able to do this.
1) In order to make a Roth IRA contribution, you would need to have earned income. (which maybe you do have and may be in a position to satisfy this)
2) You cannot make a contribution to a Roth with securities, cash only. So if you have earned income and could contribute to a Roth IRA you would need to liquidate those securites, contrubte the cash and then re-purchase them. This may have inherent tax consequences in itself.
3) Should you be able to satify the first two points, you would be limited to contirbuting a maximum of $6500 ($5500 plus $1000 catch up) for 2017.
I would be curious as to what your goal is here as far as having assets in TOD vs. a Roth. Both can have beneficiaries in a similiar fashion, unless you are simply looking to allow the assets to accumulate tax free.
I would highly suggest you consult with a fiduciary advisor and your CPA to see if what described above will/will not work for you. Then if it does not work, have a conversation surrounding your ultimate goal and maybe there is another solution that will bring you to the same place.
Best of luck and be sure to consult with your advisory team to review what strategy would be best for you.
You cannot contribute to a Roth IRA unless you have earned income. Even then, the annual limit is currently $6,500 (including catch-up). Earned income is from active participation in a business - like wages, salary, bonuses. Interest and dividends are unearned income.
I'm not sure what your concern is with the TOD account versus a Roth? Are you concerned about beneficiary designations? With a Transfer on Death (TOD) account, the assets will pass to the beneficiary(ies) and avoid probate like they would with a Roth IRA. If the money is currently in a taxable account and you add a TOD designation, this does nothing to change the tax characteristics. However, the beneficiary would get a step-up in basis at your death.
Hope this helps!