My parents FA set up an ira for me while I was in college. I funded the 5500 max for 2 years. Now I have my own Roth IRA and fund that. Just realized that ira that was opened when I was in school was not a roth. Converted in and now will have to pay taxes on the gain (15k of gains). Should Wells Fargo cover this or is this a lost cause for them messing up

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We are starting the year off strong for worlds most entitled post award ...

likefunnyuplifting

That is frustrating. WF doesn’t have a fiduciary standard as a poster mentioned above. They should—maybe you can join others in supporting that legislation. You can also take your concerns to WF or see if the press would like to run an expose (good luck...). Bottom line, this stuff happens to unwitting folks all the time.

They didn’t mess anything up..

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You didn’t have to convert it though. Most people have a mix of both. Your choice resulted in the taxes but if you believe Roth is superior, this is not a bad thing either. You paid the taxes today and expect your tax rate to be higher later.

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Unless you're saying that opening traditional instead of Roth is a breach of fiduciary responsibility (if they are even fiduciaries), I'm failing to see what your actual claim against them is...

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That’s the most likely scenario for the FA advising your parents to open a Traditional IRA instead of a Roth. Unfortunately this means that you’ll have to pay taxes (at your current marginal rate) on the entire balance that you converted, not just the gains. On the bright side, once your MAGI exceeds the limit for contributing directly to a Roth IRA and you start doing a back door, having a zero balance in your Traditional IRA account will allow you to avoid the pro-rata rule.

A conversion from traditional to Roth is a taxable event, so you are responsible for the taxes

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Exactly, you are effectively giving back the benefit you got from the traditional IRA, since it is no longer that. I’m sure your advisor can give a better explanation, but essentially you are trading one set of benefits for another

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Why is it their fault that you were unable to read the paperwork?

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Call Wells Fargo and post the transcript. Could use a good laugh.

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Or, you could’ve just kept the original amount in the trad IRA and only invested in the Roth going forward. Then, paid the tax when you had an RMD in the original and had to withdraw at a lower rate as a retiree.

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OP — never assume anything. You could lose your career tomorrow, for reasons unknown. Just accept you were able to save the max and let it ride. You are fortunate in that matter.

Can I get the manager plz?

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If you are talking to Wells Fargo there is almost zero chance who you talked to, or the org in general, is held to a fiduciary standard. They are almost certainly held to the “appropriate” standard which this certainly fits. Obama tried to change this, to make the fiduciary standard the norm, but Trump took it out. Imagine that. Sorry bud, but you have zero case against them.

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You can pay the taxes from the principal. Or you can keep this account separate until retirement.

WF should help you determine which action would be best for your situation. My guess is the best thing would be to just leave the account as is and open a Roth and contribute to that while your income level allows and then contribute to the traditional again once your income reaches the limit

Perhaps consider moving your account to another institution? WF is not known for their Wealth Management arm.

Leave it a traditional. Employer matches typically go into the traditional (non-Roth) bucket so you’ll likely have both over the long term.

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