Retirement Opportunity

Skullet

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Forgive the CPA thinking, but this might just be the opportunity of all opportunities to do a Roth conversion. Our current tax rates coupled with the recent slump in stocks give us all a chance to do something which benefits us in the years to come.
 


shorthairsrus

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Cdc 8 weeks. Nothing will be left Roth loss we all know what good that will be. The only thing to trade will be lead and gunpowder
 

3geese4me

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Forgive the CPA thinking, but this might just be the opportunity of all opportunities to do a Roth conversion. Our current tax rates coupled with the recent slump in stocks give us all a chance to do something which benefits us in the years to come.

I have an accounting degree and have the same thought process. I've been telling my co-workers (electricians) that now is the time to make moves. They think I'm crazy, however.
 


Bed Wetter

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You think its bottomed out?
If you believe the Dow Jones Indistrial Average will eventually get back to 29,000 and you invest in low-cost Fidelity and Vanguard index funds, everything you buy now will become more valuable. If you wait too long hoping to catch the bottom, you might miss the wave. It’s already at 19,000. Just start buying now.
 
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db-2

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Based on my projected income in retirement in 2020 (SS, plan I earned in SE Asia by artillery, and some interest) I will pay little federal income tax versus a bunch in 2019. Do my own taxes and got 2019 done yesterday and based on what I now know I will have less than $1,000 in federal tax in 2020 (would of been zero if not for Al Gore). In fact I might have earned income credit. Next year my state tax should be about zero by taking SS out versus $1,767 in 2019.

Good share of my savings is in IRA's (not 401) and yes it is tax as I take it out, interest is not tax as I earn so taxable interest in 2020 is low. Plan is to take only the amount require by law due to my age out of those IRA unless something bad happens as current income covers most of my needs.
So not sure how this conversion to Roth helps me, so explain like guywhowould like to know ask. db-2

(Wife baking, said to go to store and get some eggs, fat chance but there was at least 120 boxes on hand and all kinds of milk)
 
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49994

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With the reduction in your 401k due to the virus the number your converting into your Roth will be less, therefor less tax to pay on the conversion.
 

db-2

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Bed wetter:
Edward Jones advise me to purchase 40000 in four different companies in January.
that went south in a hurry. I have no ideal how to invest on my own and if that is the best Ed can do for me I am sure with my luck if I invest it will go a lot more south. db

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So if i convert my 401 to Roth and the market goes up will my monies still be in the same market and ride it up? db
 


db-2

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I still do not see how I benefit in the end. If I cash in at the bottom how then do I ride it up with monies in a roth? db

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I assume one does not pay tax when converting a 401 or ira to a roth but only when one takes it out as income. no/yes db
 

WormWiggler

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Is this approach for funds that are not already into a common stock based vehicle, what if you're nearly fulling invested?
 

db-2

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Do these conversion funds stay in the same account at the same place only with a different name?
 

Davey Crockett

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I get what skullet is saying , I thought long and hard about it until I looked at the 2021 tax bracket and decided not to draw it all at once.

We rolled it over to a fund where it is hopefully safe and have the option to roll it back and forth between a high risk and a what is supposedly a "no risk" fund 2 times a month. I think the best in our case is to draw as much as we can and still stay in the 12% tax bracket. The next tax bracket is 24% that one sucks. Everyone has a different situation so what is good on this end might not be good on your end .


I sent an email to my tax guy about it last week in hopes there is a loophole that I don't see but this was his response.

" If you touch the money and then reinvest that reinvestment then becomes ‘basis’ in the new investment that you don’t pay tax on again."

At least in our case it looks like slow and steady wins the race. If we didn't have the option to roll it over into a safer fund that the stock market doesn't affect we would have pulled it rather than roll it over and 25% of it would have been dust in the wind.

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I meant to say 2020 tax bracket
 


ItemB

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Is there a limit on what you can convert? So you pay the taxes on your 401k then roll into the Roth and it grows tax free essentially? Maybe dumb questions. Is this something that would benefit a person with 20-30 years left before retirement?
 

dschaible

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Cash is the best position to be in at this point. Think 4-6 months before you start buying, 18-36 months before the bear markets over and recovery begins, times may very but this will not be a quick v recovery anytime soon, markets will most likely continue to grind downward for years to come. We are in a bear market, the last 11 years are over.

Some companies will not make it though this event, you do not want to own stock in those, best to wait to see who survives.

Financial advisers are used car salesmen, recommending you throw 40k in at the top of a 11 year bull market is criminal.
 

shorthairsrus

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I am going to give you my opinion --- let trump talk the talk -- by next monday --- if the bars, restaurants are allowed to open --- school they can leave closed -- -go to school in the summer. But if everything else comes back on line ---- then start buying.
 

SDMF

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I AM NOT A FINANCIAL PLANNER, I HAVE NO TIES AT ALL TO THE FINANCIAL SECTOR

Here's the Captaincies obvious version:

While you're working, 401K comes out of your paycheck pre-tax and lowers your tax burden during that time. These $$ grow (hopefully) or shrink completely free from any taxation until you reach 59.5yrs old. @ 59.5, you can begin to draw upon your 401K. Those withdrawals will be taxed at whatever your tax rate is in the withdrawal year. The idea being once you retire, you're income will be lower than it was while you were working and you'll pay less taxes on the withdrawals than you would've if you'd taken that $$ during your working years.

Roth $$ is post-tax $$ invested into an account that also cannot be drawn upon until you're 59.5, so you've taken regular income and agreed to have it invested until retirement. Once you reach 59.5, you may withdraw from your Roth without any taxes at all, they were all paid up front.

I don't know the rules are regarding precisely what you can and cannot invest in with these $$.
 

Lycanthrope

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So if you are in a higher tax bracket right now that you likely will be once your retire, doesnt that kinda offset any gains you would get by converting at this 'discounted' Price? I did increase my 457 plan donations 3x starting this month, if you can afford to, its a good time to put money in I figure...
 


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