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Re: Advice on 401k - Traditional vs Roth

Since you're young and single your marginal tax rate is probably high, so you should very probably be maxing your traditional 401k ($17,500 in 2014) and then contributing to a Roth IRA if you can afford to save more.
by Bob's not my name
Thu Aug 21, 2014 8:14 pm
 
Forum: Investing - Help with Personal Investments
Topic: Advice on 401k - Traditional vs Roth
Replies: 7
Views: 442

Re: Roth Conversion - Old Age

You have to enter real numbers into any model or tax software to get useful guidance, and we don't know what those numbers are. As House Blend pointed out, their real income (including investment income on the $120,000) may place them in a 28% bracket for Roth conversions. And the wife would pay unn...
by Bob's not my name
Wed Aug 20, 2014 10:11 am
 
Forum: Investing - Help with Personal Investments
Topic: Roth Conversion - Old Age
Replies: 31
Views: 1155

Re: Move all bonds to Roth IRA?

You can withdraw Roth IRA contributions (but not earnings) at any time for any reason, penalty-free. No five years. You can withdraw $10,000 from a TIRA, penalty-free, for a first home purchase. You wouldn't want to do either, because you are short on tax-advantaged space. The math on Roth vs. TIRA ...
by Bob's not my name
Wed Aug 20, 2014 5:11 am
 
Forum: Investing - Help with Personal Investments
Topic: Move all bonds to Roth IRA?
Replies: 13
Views: 1548

Re: 401k versus Roth IRA

Thanks for that clarification. You know that AGI and taxable income are completely different things, right? Anyway, you're in the 30% bracket, so go 401k.
by Bob's not my name
Tue Aug 19, 2014 9:18 pm
 
Forum: Investing - Help with Personal Investments
Topic: 401k versus Roth IRA
Replies: 15
Views: 657

Re: Roth Conversion - Old Age

MDisciple87 wrote:Her Pension: $480
His Pension: $1,893
Gross or net after withholding?
by Bob's not my name
Tue Aug 19, 2014 8:56 pm
 
Forum: Investing - Help with Personal Investments
Topic: Roth Conversion - Old Age
Replies: 31
Views: 1155

Re: 401k versus Roth IRA

1 dependent infant Tax Rate: 25% Federal (118k taxable last year for HH) It looks like you're above the child tax credit phaseout (AGI $110,000 - $130,000 for one kid), but pay attention to that, because your marginal rate is 30% in the phaseout, which makes 401k contributions even more attractive....
by Bob's not my name
Tue Aug 19, 2014 8:55 pm
 
Forum: Investing - Help with Personal Investments
Topic: 401k versus Roth IRA
Replies: 15
Views: 657

Re: Roth Conversion - Old Age

Thanks very much for that. Here's what (little) I know about Michigan, but I'm not a Michigan taxpayer and I'm not going to look it up: Michigan (4.25%, 6.75% in Detroit) had a $90,000 exemption for taxpayers over 59.5, but in 2012 that was reduced to $40,000 and the age requirement was raised to 67...
by Bob's not my name
Tue Aug 19, 2014 4:52 pm
 
Forum: Investing - Help with Personal Investments
Topic: Roth Conversion - Old Age
Replies: 31
Views: 1155

Re: Roth Conversion - Old Age

Modest at 30% tax rate is still 30% tax rate. Why would a person of modest means voluntarily pay tax at that rate?

Taxcaster 2025 isn't available yet.
by Bob's not my name
Tue Aug 19, 2014 4:32 pm
 
Forum: Investing - Help with Personal Investments
Topic: Roth Conversion - Old Age
Replies: 31
Views: 1155

Re: Roth Conversion - Old Age

Summary provided shows no taxable holdings with gains, just a bank account. If there were, combining gains with conversions would result in the conversion being taxed at 30%, plus state tax for him if over the exemption amount and for her regardless of amount. Since there aren't, I think (and, again...
by Bob's not my name
Tue Aug 19, 2014 4:13 pm
 
Forum: Investing - Help with Personal Investments
Topic: Roth Conversion - Old Age
Replies: 31
Views: 1155

Re: Roth Conversion - Old Age

I'm not an expert on Social Security taxation, but you probably want to become one. The wiki indicates to me a conversion would be taxed at a higher rate. Be sure to look at Michigan tax as well -- there are key exemption requirements there.
by Bob's not my name
Tue Aug 19, 2014 3:37 pm
 
Forum: Investing - Help with Personal Investments
Topic: Roth Conversion - Old Age
Replies: 31
Views: 1155

Re: Roth Conversion - Old Age

Yeah, I caught that error myself. Doh.
by Bob's not my name
Tue Aug 19, 2014 3:29 pm
 
Forum: Investing - Help with Personal Investments
Topic: Roth Conversion - Old Age
Replies: 31
Views: 1155

Re: Roth Conversion - Old Age

Their marginal rate on a conversion would not be 15%.
by Bob's not my name
Tue Aug 19, 2014 3:26 pm
 
Forum: Investing - Help with Personal Investments
Topic: Roth Conversion - Old Age
Replies: 31
Views: 1155

Re: Roth Conversion - Old Age

It's definitely not old age and they don't have so much money that they can be sure they won't need it all to pay for long-term care later. Therefore voluntarily paying any tax may not be a good idea. At the very least it requires careful study. When your federal rate is 15% your state tax is an imp...
by Bob's not my name
Tue Aug 19, 2014 3:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Roth Conversion - Old Age
Replies: 31
Views: 1155

Re: Asset Allocation 50 yr old couple too much taxable cash.

$23,000 once you're 50. You had the right maxes for the SIMPLE and Roths but not for the 403b. More tax-advantaged space :D Also, make sure the kid doesn't pay the final tuition bill before Jan 1 of graduation year (that is, whichever calendar year marks the end of graduate school). Most universitie...
by Bob's not my name
Sun Aug 17, 2014 2:02 pm
 
Forum: Investing - Help with Personal Investments
Topic: Asset Allocation 50 yr old couple too much taxable cash.
Replies: 9
Views: 721

Re: Asset Allocation 50 yr old couple too much taxable cash.

I suggest maxing her 403b with another $5,500. I also suggest managing tuition payments so you can get the American Opportunity Tax Credit, if you're eligible -- I don't know if this makes sense vs. paying entirely out of the 529, but it's worth considering, since it's a $2,500 credit.
by Bob's not my name
Sun Aug 17, 2014 1:50 pm
 
Forum: Investing - Help with Personal Investments
Topic: Asset Allocation 50 yr old couple too much taxable cash.
Replies: 9
Views: 721

Re: Gift Tax and Gifting to child.

I see two immediate problems: 1) Misunderstanding of the gift tax, which is not income tax. 2) I don't think $1.5M is too much for a 68-year-old to have. Long term nursing care can consume all that. So I suggest education on the gift tax. Hopefully that will take your parent about thirty years. I'm ...
by Bob's not my name
Sun Aug 17, 2014 1:47 pm
 
Forum: Investing - Help with Personal Investments
Topic: Gift Tax and Gifting to child.
Replies: 2
Views: 264

Re: Should I Invest in both T-IRA & R-IRA?

Right, and he may have a little more headroom in the 15% bracket because with his mortgage and high state tax he probably itemizes. Also, I've been assuming throughout that he doesn't have pre-tax health, dental, or disability insurance premiums or FSA contributions withheld from his pay or his wife...
by Bob's not my name
Sat Aug 16, 2014 1:32 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I Invest in both T-IRA & R-IRA?
Replies: 34
Views: 1238

Re: Should I Invest in both T-IRA & R-IRA?

Start by reading your own tax return, line by line, to get the picture. The form and instructions are designed for a step-by-step zombie walk rather than to reveal to you how you're being taxed, so it takes a little studying to figure our how each line is really affecting you.
by Bob's not my name
Sat Aug 16, 2014 1:02 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I Invest in both T-IRA & R-IRA?
Replies: 34
Views: 1238

Re: Should I Invest in both T-IRA & R-IRA?

$95,000 gross income has you in the 15% bracket already. As I explained in my first post, if your gross income exceeds $110,000 and you make NO pre-tax retirement contributions, you will be in the 25% federal bracket, the 7% state bracket, and the child tax credit phaseout. The $1,000 credit phases ...
by Bob's not my name
Sat Aug 16, 2014 12:48 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I Invest in both T-IRA & R-IRA?
Replies: 34
Views: 1238

Re: Should I Invest in both T-IRA & R-IRA?

$73,800 taxable income = 2014 top of 15% bracket + $12,400 standard deduction + $7,900 two personal exemptions + $2,400 special deduction for 65-and-over crowd because they're so special -------------- $96,500 gross income Why your current rate is probably 35% is explained in my first post in this t...
by Bob's not my name
Sat Aug 16, 2014 11:21 am
 
Forum: Investing - Help with Personal Investments
Topic: Should I Invest in both T-IRA & R-IRA?
Replies: 34
Views: 1238

Re: Should I Invest in both T-IRA & R-IRA?

Our income at 70.5 should be roughly $85,000, give or take a few thousand. If this is ultimately the case, I should stay in the 25% bracket in retirement. Why? That's more than $10,000 below the current 25% bracket for a couple over 65 with no dependents, and way below what it will be when you're r...
by Bob's not my name
Sat Aug 16, 2014 11:05 am
 
Forum: Investing - Help with Personal Investments
Topic: Should I Invest in both T-IRA & R-IRA?
Replies: 34
Views: 1238

Re: Should I Invest in both T-IRA & R-IRA?

It's not very likely that you exceed the income limit, on a military income, for your wife to make deductible contributions to a traditional IRA. The phaseout starts at $181,000 AGI for a spouse not covered by an employer plan. Your own eligibility starts phasing out at $96,000 AGI. AGI is reduced b...
by Bob's not my name
Fri Aug 15, 2014 8:53 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I Invest in both T-IRA & R-IRA?
Replies: 34
Views: 1238

Re: Converting an inherited Roth IRA to a regular Roth IRA

How Lazarus Rushed a Fraternity would be catchier.
by Bob's not my name
Thu Aug 14, 2014 10:33 am
 
Forum: Personal Finance (Not Investing)
Topic: Converting an inherited Roth IRA to a regular Roth IRA
Replies: 11
Views: 672

Re: Maxing out 457 and Traditional IRA: both deductible?

mjadas wrote:In your example, the credit would actually be $200.
In his example it would actually be $0. AGI limit is $30,000.
by Bob's not my name
Thu Aug 14, 2014 10:29 am
 
Forum: Investing - Help with Personal Investments
Topic: Maxing out 457 and Traditional IRA: both deductible?
Replies: 8
Views: 421

Re: Converting an inherited Roth IRA to a regular Roth IRA

Change the title; everyone will say you cannot convert an inherited IRA. I think your method will work though, provided you qualify to make a Roth contribution. Is the inherited IRA subject to the 5 yr "Roth" rule about withdrawals being taxable/non-taxable? Haha, the title was deliberate...
by Bob's not my name
Thu Aug 14, 2014 10:03 am
 
Forum: Personal Finance (Not Investing)
Topic: Converting an inherited Roth IRA to a regular Roth IRA
Replies: 11
Views: 672

Converting an inherited Roth IRA to a regular Roth IRA

My wife has a $40,000 inherited Roth IRA. In 2014, 2015, and 2016 we won't be able to contribute to our regular Roth IRA's because we need to pay for college (we will still be putting about $50,000/year in my 403b and her SIMPLE IRA). It occurs to me that we could withdraw $13,000/year from the inhe...
by Bob's not my name
Thu Aug 14, 2014 9:23 am
 
Forum: Personal Finance (Not Investing)
Topic: Converting an inherited Roth IRA to a regular Roth IRA
Replies: 11
Views: 672

Re: Maxing out 457 and Traditional IRA: both deductible?

⋅ OP lives in CA, so has a high state tax. ⋅ OP is in the 25% bracket, not 15%. ⋅ TIRA deduction phaseout is MAGI $60,000 - $70,000, not $59,000 - $69,000. ⋅ Saver's credit is fully phased out at AGI $30,000, not $60,000. ⋅ OP says he has no employe...
by Bob's not my name
Thu Aug 14, 2014 7:07 am
 
Forum: Investing - Help with Personal Investments
Topic: Maxing out 457 and Traditional IRA: both deductible?
Replies: 8
Views: 421

Re: Selling stocks and minimizing taxes

Both good points, but also remember the base year system of financial aid. You can use UTMA funds for the benefit of the child before college, mooting the issue. Also, you may be ineligible for aid with only one kid in college but eligible with two. That means as long as the first kid has depleted h...
by Bob's not my name
Wed Aug 13, 2014 3:41 am
 
Forum: Investing - Help with Personal Investments
Topic: Selling stocks and minimizing taxes
Replies: 16
Views: 784

Re: Selling stocks and minimizing taxes

Oh yeah, and you could gift some stocks to your four kids via UTMAs and have them sell in increments over the years at 0% tax, provided you stay under the $2,000 kiddie tax limit, which remember includes not just the gains but also any dividends thrown off by the stock during the year. You might not...
by Bob's not my name
Tue Aug 12, 2014 8:38 pm
 
Forum: Investing - Help with Personal Investments
Topic: Selling stocks and minimizing taxes
Replies: 16
Views: 784

Re: Selling stocks and minimizing taxes

we have four kids under 18 Your tax rate on long term capital gains is likely at least 25%. Here are some elements of your marginal tax rate on LTCG: ⋅ 15% nominal federal tax rate for MFJ with taxable income about $74,000 to about $400,000 ⋅ 5% due to phaseout of the child tax ...
by Bob's not my name
Tue Aug 12, 2014 8:25 pm
 
Forum: Investing - Help with Personal Investments
Topic: Selling stocks and minimizing taxes
Replies: 16
Views: 784

Re: $65k bonus for student loans...considering not taking it

One of the bonuses my employer offers is $65k toward student loan debt repayment over three years. The trouble is, this money is taxable. Thus, I would be incurring an additional $20k+ tax liability every year. The taxes would come out of the $65k, but I am unsure how this would affect my Roth IRA ...
by Bob's not my name
Tue Aug 12, 2014 11:41 am
 
Forum: Investing - Help with Personal Investments
Topic: $65k bonus for student loans...considering not taking it
Replies: 30
Views: 3294

Re: Tiny portfolio allocation for student

A senior in college can make more through tax mitigation than through investing. Will your parents have claimed the $2,500 American Opportunity Tax Credit for 2011, 2012, 2013, and 2014? If not all four years, you may be able to claim the credit in 2015, provided you do NOT pay your final tuition bi...
by Bob's not my name
Sat Aug 09, 2014 7:15 am
 
Forum: Investing - Help with Personal Investments
Topic: Tiny portfolio allocation for student
Replies: 7
Views: 571

Re: New Investor Taking Control of Finances

I live in MA and will attend graduate school here. I don't think my parents ever claimed the American Opportunity Tax Credit since I don't have any tuition. I am entering my senior year of college and am currently 26. In my brokerage account I currently have a loss of $6,800 and don't think I had a...
by Bob's not my name
Thu Aug 07, 2014 4:31 am
 
Forum: Investing - Help with Personal Investments
Topic: New Investor Taking Control of Finances
Replies: 8
Views: 925

Re: Celebrate the FSA

Looks right to me. My confidence is increased by the fact that your answer differs from HR's, because HR is dependably wrong on everything.
by Bob's not my name
Thu Aug 07, 2014 4:12 am
 
Forum: Investing - Theory, News & General
Topic: Celebrate the FSA
Replies: 69
Views: 10700

Re: New Investor Taking Control of Finances

Besides liquidating the speculative investments, you should focus on tax mitigation, since state governments and the federal government impose quirky tax burdens on students. Awareness of these quirks can save you thousands of dollars. ⋅ What is your state of residence? ⋅ In what...
by Bob's not my name
Wed Aug 06, 2014 4:53 am
 
Forum: Investing - Help with Personal Investments
Topic: New Investor Taking Control of Finances
Replies: 8
Views: 925

Re: Un-matched 403(b) vs. Roth IRA

Is she also in Illinois? If so, she'll be in a lower tax bracket tomorrow than she is today. Illinois taxes Roth IRA contributions but it exempts Roth IRA conversions. An Illinois resident with $53,000 gross income should consider that her tax rate on Roth IRA contributions is 30% , while her tax on...
by Bob's not my name
Tue Aug 05, 2014 9:00 pm
 
Forum: Investing - Help with Personal Investments
Topic: Un-matched 403(b) vs. Roth IRA
Replies: 6
Views: 345

Re: Portfolio review

Hmm, I assumed that if you retire at 45 with massive taxable accounts you wouldn't be drawing anything from your tax-advantaged (although you might choose to do conversions) and your kids would still be dependent college students. The tax burden depends on whether you're trying to compute the tax bu...
by Bob's not my name
Fri Jul 25, 2014 11:19 am
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio review
Replies: 20
Views: 1991

Re: Portfolio review

$140k. That fills the entire 25% bracket for MFJ Haha, no it doesn't. You're forgetting the $40,000 0% bracket for a family of four, the $20,000 10% bracket (in which LTCG/QD are taxed at 0%), and the $55,000 15% bracket (in which LTCG/QD are still taxed at 0%). You'd have so little income sticking...
by Bob's not my name
Fri Jul 25, 2014 6:54 am
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio review
Replies: 20
Views: 1991

Re: Removing a beehive from mailbox newspaper holder

Given the quality of journalism nowadays, I'm pretty sure the newspaper will kill them if you just give it time.
by Bob's not my name
Thu Jul 24, 2014 8:52 pm
 
Forum: Personal Consumer Issues
Topic: Removing a beehive from mailbox newspaper holder
Replies: 43
Views: 4542

Re: Exceptionally high marginal rates on MD, VA students

I'm more of a fix-it-yourself kind of guy :) Surf's up!
by Bob's not my name
Tue Jul 22, 2014 11:04 am
 
Forum: Personal Finance (Not Investing)
Topic: Exceptionally high marginal rates on MD, VA students
Replies: 30
Views: 2927

Re: Exceptionally high marginal rates on MD, VA students

There appears to be no issue in Massachusetts, since the undergraduate tuition deduction, rental deduction, payroll tax deduction, and personal exemption pretty much eliminate taxation at the low end.
by Bob's not my name
Tue Jul 22, 2014 10:24 am
 
Forum: Personal Finance (Not Investing)
Topic: Exceptionally high marginal rates on MD, VA students
Replies: 30
Views: 2927

Re: Exceptionally high marginal rates on students

12. New Jersey – “income” over $10,000 This is an issue, although not a serious one because NJ state taxes are very progressive. For income of $10,000, the tax due is zero (even if you have to file a return to get a refund of withheld tax). For income of $10,001 with one $1000 personal exemption, t...
by Bob's not my name
Tue Jul 22, 2014 6:43 am
 
Forum: Personal Finance (Not Investing)
Topic: Exceptionally high marginal rates on MD, VA students
Replies: 30
Views: 2927

Re: Exceptionally high marginal rates on students

It looks like a significant issue in Virginia. If your Virginia AGI is less than $11,950 (for 2012 and later years) you owe no tax and you are entitled to a refund of any withholding. You must file a return to receive a refund. There's a $3,000 standard deduction, and no exemption for a dependent, s...
by Bob's not my name
Tue Jul 22, 2014 5:21 am
 
Forum: Personal Finance (Not Investing)
Topic: Exceptionally high marginal rates on MD, VA students
Replies: 30
Views: 2927

Re: Exceptionally high marginal rates on students

No issue for Idaho. Standard deduction matches filing threshold for dependents.
by Bob's not my name
Mon Jul 21, 2014 5:05 pm
 
Forum: Personal Finance (Not Investing)
Topic: Exceptionally high marginal rates on MD, VA students
Replies: 30
Views: 2927

Re: Exceptionally high marginal rates on students

It looks to me like there's no significant issue in Kentucky. You have to file if your (essentially) federal AGI exceeds $11,490 (2013 number), but the tax burden at that precise level is $0 and at slightly above that level is less than $100. A dependent student can claim himself. There's a $2,360 s...
by Bob's not my name
Mon Jul 21, 2014 1:20 pm
 
Forum: Personal Finance (Not Investing)
Topic: Exceptionally high marginal rates on MD, VA students
Replies: 30
Views: 2927

Re: Exceptionally high marginal rates on students

Thanks. I'd say a $99 ledge doesn't meet the "significant" threshold. I'm looking for high marginal rates (>50%) that span several thousand dollars of income, such that countervailing steps like 401k contributions (or going to the beach instead of working) are warranted.
by Bob's not my name
Mon Jul 21, 2014 1:15 pm
 
Forum: Personal Finance (Not Investing)
Topic: Exceptionally high marginal rates on MD, VA students
Replies: 30
Views: 2927

Re: Exceptionally high marginal rates on students

I suppose the filing threshold can be set by regulation vs. legislation if it merely matches the zero tax certainty mark. And the regs may not be issued yet.
by Bob's not my name
Mon Jul 21, 2014 8:43 am
 
Forum: Personal Finance (Not Investing)
Topic: Exceptionally high marginal rates on MD, VA students
Replies: 30
Views: 2927
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