Pro-rata IRA aggregation
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Definition
All traditional IRAs are one pool for Roth conversions and distributions of after-tax amounts.
Pro-rata IRA aggregation in plain English
A client has 90k of pre-tax IRA money and 10k of after-tax basis and wants to convert only the after-tax slice. Pro-rata IRA aggregation treats all traditional IRAs as one pool for Roth conversions and distributions of after-tax amounts, so that $10k conversion is still 90% taxable. Remember: all traditional IRAs are one pool for Roth conversions and distributions of after-tax amounts. The classic miss is pretending basis can be cherry-picked from a single IRA while other traditional IRAs sit ignored.
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