Retirement Opportunity

[Davey Crockett]

Dschaible , That's my thought too. I hope like hell we are both wrong and at the same time I don't want to sound like the sky is falling either but each and every one of us have an opinion, That's the only thing that can't be taken away from us. A few days ago I was talking stock markets with my oldest boy who I'm sure has a good financial planner , I won't say how much he lost the day before we talked but it was a bunch. He was calm as a cucumber about the loss and saying it will come back. I haven't dared to or cared to ask him about it because no matter what he was already on the way down the rabbit hole. This event is unprecedented to every advisor I have visited with in my lifetime. The only advisors who made any mention of world events such as this have all died from old age. Funny how it takes so long to learn something and then it gets forgotten about in less than one generation.

 

[3Roosters]

401k or IRA's for dummies..i know there is a book out there..haha
Traditional 401k (pretax)..lets say you make $60,000 year and contribute $3000 into your traditional 401k, thus your TAXABLE amount is only $57,000..saving you tax deducts... and then when you withdraw from this account...assuming post 59 1/2 yrs old..it will be taxed at the rate you are at, at that age..not only your deduction amount but also any growth in the account...perhaps not a big deal if you are retired and don't have any other income.
Roth: Its After tax...ie..that same $60,000 wage earner will see $60,000 on their taxable income versus $57,000 in the traditional scenario..big difference is since you have already paid tax on your Roth contributions..withdrawals are tax free..as is the growth.
Couple other items:
Traditional 401ks and IRA's have Required Minimum Distributions once you reach 70 and 1/2 ys old(whether you want to take money or not). ROTH accounts do not have that requirement.
Personally, I have both Traditional and RoTh.. if I need more money each year when I retire and don't want it to be taxed, I will take out of ROTH. I think it makes sense to have both..just my opinion

There are only a couple tax free vehicles to pass on to your beneficiaries. ROTH 401, IRAs and Life Insurance...both of which are subject to the good ole Gov changing when they need the money. My guess is if you have EXISTING ROTHs and Life that it will be grandfathered but new(when new laws are passed) will be taxable..but..we all know our legislators can an do how they wish.
Term limits!

 

[Up Y'oars]

I'd just throw this in. The DOW will hit 15,000 pretty soon. It will also hit 10,000 this spring/summer. You can do all the dollar cost averaging you want, but it's going down. Visit this comment in May and let me know if I'm wrong.

:;:sorry

 

[Skullet]

It appears to be anyone’s guess as to when these markets find rock bottom, so that’s the wild card in this equation.

The rest of it is pretty straightforward. We have portfolios that have all dramatically decreased in value, presumably less income (if this doesn’t end quickly) and low tax rates.

I have yet to meet a finical planner who understands the impact of IRA withdrawals on the taxable portion of your social security benefits. I’ve seen far too many clients contribute to a traditional IRA and save 15% only to have those withdrawals create taxable social security and ultimately cost 27.75% to withdraw. If you can convert at these prices and tax rates you’ll win.

 

[db-2]

SDMF and rooster:

You got in right as to how i was learn back in the old days when roth came out.
Why i did not convert back then some IRA monies i am not sure.

Question i have:
If i had $100,00 in a 401 and is now worth $50,000 can i convert that 50,000 to a roth in the same type of account so my basics is the 50,000 and no taxes then on the 50,000 it will gain back over the next few months when i start withdrawing? db

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These last years a portion of my income has been federal tax in the 20% range. Monies put in a IRA saved me. I can not put in anymore but i just put the max of $7,000 for my wife and at 22% tax rate that was my savings plus a llttle state.

With no income now other than SS there will be some tax but very little at a marginal rate so it worked for me as they said it would. db

 

[Allen]

SDMF and rooster:

You got in right as to how i was learn back in the old days when roth came out.
Why i did not convert back then some IRA monies i am not sure.

Question i have:
If i had $100,00 in a 401 and is now worth $50,000 can i convert that 50,000 to a roth in the same type of account so my basics is the 50,000 and no taxes then on the 50,000 it will gain back over the next few months when i start withdrawing? db

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These last years a portion of my income has been federal tax in the 20% range. Monies put in a IRA saved me. I can not put in anymore but i just put the max of $7,000 for my wife and at 22% tax rate that was my savings plus a llttle state.

With no income now other than SS there will be some tax but very little at a marginal rate so it worked for me as they said it would. db

By "same type of account" you mean similar stocks, mutual funds, etc, the answer is yes. However, you would have to pay taxes on that $50,000 you take out of your retirement account to put into the Roth. So I your marginal tax bracket is 20%, you would only have $40,000 in your Roth after it is all said and done (unless you use some other savings to pay the taxes, I'm assuming you'd pay the taxes out of your retirement funds).

Anyway, now you have $40k that can grow tax free.

Good deal? Only you can be the judge of that.

 

[shorthairsrus]

I'd just throw this in. The DOW will hit 15,000 pretty soon. It will also hit 10,000 this spring/summer. You can do all the dollar cost averaging you want, but it's going down. Visit this comment in May and let me know if I'm wrong.

:;:sorry

its going to be hell of summer. Schools out for summer.

 

[Allen]

Ehh, no. School's have been going to an online format. At least, mine are here in Bismarck at a private school.

 

[Captain Ahab]

Ehh, no. School's have been going to an online format. At least, mine are here in Bismarck at a private school.

Pretty much everybody is going online to finish the school year on time.

 

[Migrator Man]

Pretty much everybody is going online to finish the school year on time.

And if the schools don’t get their online plan approved kids will be going to school in June! According to burgums press conference

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I'd just throw this in. The DOW will hit 15,000 pretty soon. It will also hit 10,000 this spring/summer. You can do all the dollar cost averaging you want, but it's going down. Visit this comment in May and let me know if I'm wrong.

:;:sorry

I just don’t get how a bad couple months can really collapse the stock market in half?!?!? It’s not like the fundamentals were bad. If a guy want to gamble spend some money at rock bottom and enjoy the ride back up!

 

[Ristorapper]

401k or IRA's for dummies..i know there is a book out there..haha
Traditional 401k (pretax)..lets say you make $60,000 year and contribute $3000 into your traditional 401k, thus your TAXABLE amount is only $57,000..saving you tax deducts... and then when you withdraw from this account...assuming post 59 1/2 yrs old..it will be taxed at the rate you are at, at that age..not only your deduction amount but also any growth in the account...perhaps not a big deal if you are retired and don't have any other income.
Roth: Its After tax...ie..that same $60,000 wage earner will see $60,000 on their taxable income versus $57,000 in the traditional scenario..big difference is since you have already paid tax on your Roth contributions..withdrawals are tax free..as is the growth.
Couple other items:
Traditional 401ks and IRA's have Required Minimum Distributions once you reach 70 and 1/2 ys old(whether you want to take money or not). ROTH accounts do not have that requirement.
Personally, I have both Traditional and RoTh.. if I need more money each year when I retire and don't want it to be taxed, I will take out of ROTH. I think it makes sense to have both..just my opinion

There are only a couple tax free vehicles to pass on to your beneficiaries. ROTH 401, IRAs and Life Insurance...both of which are subject to the good ole Gov changing when they need the money. My guess is if you have EXISTING ROTHs and Life that it will be grandfathered but new(when new laws are passed) will be taxable..but..we all know our legislators can an do how they wish.
Term limits!

Required Minimum Distributions (RMD) went up from age 70 1/2 to age 72 recently

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And if the schools don’t get their online plan approved kids will be going to school in June! According to burgums press conference

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I just don’t get how a bad couple months can really collapse the stock market in half?!?!? It’s not like the fundamentals were bad. If a guy want to gamble spend some money at rock bottom and enjoy the ride back up!

But, where is rock bottom??

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Roth Conversion:
Lets say for example the wife and I made $50,000 after all interests were added and all deductions were taken. We are in the 12% tax bracket. The maximum for the 12% tax bracket is lets say $78,000 (I think I am close)? So in order not to go into the next tax bracket which is 22% i only can make a Roth conversion of $78,000 - $50,000 = $28,000. Best to make it a little less so as not to get pushed into the 22% tax bracket. SO now to convert $28,000 (or a bit less) you will pay 12% tax on that $28,000 or $3360. IF you miss calculate and convert to much and get pushed into the 22% tax bracket you will pay more taxes on the $50,000 and the lets say $29,000 (mistake) conversion you made. Big mistake.

If you are in the 22% tax bracket the next is only 2% higher at 24% so you could probably convert up to the maximum amount of the 24% tax bracket. Best to get your tax advisor involved with this conversion if you have one.

One thing about converting Traditional to Roth is it will increase your income for the year thus increasing the tax on your social security (if you are drawing that). So that conversion will cost you some more TAXes. Never ending. In the example above where our income is $50k, lets guess only 48% of the Social security benefit is taxed. If I max out the conversion to put me at the top of the tax bracket 85% of our social security is taxed. Like I say easier if you have a tax advisor. AND easier if you are retired in a lot of cases as most of the income is fixed and easy to do the calculations yourself.

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https://www.nerdwallet.com/blog/investing/roth-ira-conversion/

 

[Captain Ahab]

Required Minimum Distributions (RMD) went up from age 70 1/2 to age 72 recently

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But, where is rock bottom??

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Roth Conversion:
Lets say for example the wife and I made $50,000 after all interests were added and all deductions were taken. We are in the 12% tax bracket. The maximum for the 12% tax bracket is lets say $78,000 (I think I am close)? So in order not to go into the next tax bracket which is 22% i only can make a Roth conversion of $78,000 - $50,000 = $28,000. Best to make it a little less so as not to get pushed into the 22% tax bracket. SO now to convert $28,000 (or a bit less) you will pay 12% tax on that $28,000 or $3360. IF you miss calculate and convert to much and get pushed into the 22% tax bracket you will pay more taxes on the $50,000 and the lets say $29,000 (mistake) conversion you made. Big mistake.

If you are in the 22% tax bracket the next is only 2% higher at 24% so you could probably convert up to the maximum amount of the 24% tax bracket. Best to get your tax advisor involved with this conversion if you have one.

One thing about converting Traditional to Roth is it will increase your income for the year thus increasing the tax on your social security (if you are drawing that). So that conversion will cost you some more TAXes. Never ending. Like I say easier if you have a tax advisor. AND easier if you are retired in a lot of cases as most of the income is fixed and easy to do the calculations yourself.

You are on the right track, but wrong on how taxes work. Only the income that goes into the next bracket gets taxed at that rate. In your scenario of up to $78,000 being the 12%, if you make $85,000 only $7000 will be taxed at 22% per your scenario.

 

[Ristorapper]

.

 

[Up Y'oars]

The economic analysts say that 2Q for the country will be down more than 50%. That will affect almost all industries and push the stock market down. The problem is that the data won't come out until July 15th.

 

[sierra1995]

3Roosters and SDMF nailed it.

Only a couple things i can add to the conversation.

a 529 fund (kids college account) also serves as a "Roth" type investment, as it grows tax free and it can be passed onto beneficiaries. So, if my kids don't use use theirs, they can pass it onto their kids, etc. Or if they don't use it, i can take it out, and pay a 10% penalty on the gains. There is also no limit on how much you can contribute into a 529. I've talked to several people who do this and plan to keep it for themselves, and are OK with paying the 10% penalty. you may also be taxed on the income from the gains if you take out for personal use. Even with the penalty and taxes, you're still money ahead if you need it.

Roth IRA and IRA accounts are limited to $6,000 in contributions per year, or $7,000 if you're age 60 or older.

401k accounts, both Roth and Traditional, you can contribute up to $18,000 per year, or $24,000 per year if you are age 50 or older. As mentioned before, you (or your financial advisor/tax person) need to figure out what is best in your case, whether it is all Roth, all IRA or a combination. If you're at the top edge of your tax bracket, you may want to consider leaning more toward the IRA(traditional) option, but don't forget about the Roth option because tax-free growth is a good thing.