Search found 979 matches

by the intruder
Sat Dec 04, 2010 12:20 am
Forum: Investing - Theory, News & General
Topic: Extreme Roth Conversion Strategy?
Replies: 22
Views: 2989

[quote="market timer"][quote="the intruder"][quote="duhmel1"]How about a strategy that utilizes a 'long' index fund in one IRA and a mirror image 'short' fund in the other. Suppose the market moves 10% in the next year (either way), you will have the winner fund in the Roth IRA and the other fund recharacterized in the traditional IRA. The increase in the winner fund avoids tax. I think in essence this is what the OP is suggesting.[/quote] Forgive my ignorance but how do you short an IRA?[/quote] My IRA allowed me to short futures, buy inverse funds, and buy puts.[/quote] How can you do a short transaction since borrowing against the value of the IRA is a prohibited transaction under IRC 4975 which results in t...
by the intruder
Sat Dec 04, 2010 12:12 am
Forum: Investing - Theory, News & General
Topic: 2008 panic in money markets greater than previously known
Replies: 46
Views: 5953

The crisis is still on going.... The notional value of derivative contracts held by US financial institutions is $216.5 trillion, or more than 15 times US GDP. http://www.occ.treas.gov/ftp/release/2010-71a.pdf ...that is being accounted for as par. What is the significance of your statement? The 216T figure represents the notional value of all derivatives contracts held by instutiutions holding cross positions (buy(long) and short(sell)) in multiple contracts on the same security which will cancel each other out, not the actual amount that is owed in cash or T securities. After Lehman Bros declared bankruptcy in 2008 the Bkcy court ordered all securities firms holding positions in the 400B in LEH derivatives to settle their positions on th...
by the intruder
Fri Dec 03, 2010 11:30 pm
Forum: Investing - Theory, News & General
Topic: Extreme Roth Conversion Strategy?
Replies: 22
Views: 2989

duhmel1 wrote:How about a strategy that utilizes a 'long' index fund in one IRA and a mirror image 'short' fund in the other. Suppose the market moves 10% in the next year (either way), you will have the winner fund in the Roth IRA and the other fund recharacterized in the traditional IRA. The increase in the winner fund avoids tax. I think in essence this is what the OP is suggesting.
Forgive my ignorance but how do you short an IRA?
by the intruder
Fri Dec 03, 2010 6:19 pm
Forum: Personal Investments
Topic: Roth IRA tracking
Replies: 2
Views: 693

Re: Roth IRA tracking

rm wrote:My 401k has roth option. Before that I could only put in normal (ie non-Roth) 401k.

I have this with fidelity

How does fidelity know how much of the gain in my 401k is from my roth 401k money and how much is from non-Roth. For instance say I have 50k in 401k and this year I put in 16k into roth 401k. They keep the same account# etc for both roth and non-roth.
Now my 50k becomes 55k and 16k becomes 20k due to gains in the market.

If I ever did roll-over, I should end up not paying any taxes on the 20k.

do these companies keep track of this because I sure as well don't
Separate accountingi required for the Roth contributions and attributable gains .
by the intruder
Fri Dec 03, 2010 6:13 pm
Forum: Personal Finance (Not Investing)
Topic: Wills?
Replies: 27
Views: 3258

JDCPAEsq wrote:Did it myself and it was free although that doesn't include the cost of three years at an Ivy League law school. :D
Its free as long as you didnt screw it up in which case it will cost you heirs to fix it.
by the intruder
Fri Dec 03, 2010 4:32 pm
Forum: Personal Finance (Not Investing)
Topic: NYT: Roth IRA conversion can hurt college aid
Replies: 18
Views: 4069

Re: Any new thoughts on Roth IRA conversion impact on FAFSA?

This is an important topic. The government wants us to covert our IRA to a Roth, and pay some much needed taxes. It would be unfair to then penalize us from getting financial aid for our children's college costs because our Adjusted Gross Income goes up. Especially since we never actually receive the money. The conversion actually makes us less qualified to pay for college because we take on a substantial tax bill now instead of retirement. I went to a presentation by the chief financial aid officer at a 7,000-student NJ college. I showed him the NY Times article, and asked him if a Roth Conversion would adversely impact my ability to get aid. He didn't even understand the issue. He didn't understand how a conversion would artificially inc...
by the intruder
Fri Dec 03, 2010 12:09 pm
Forum: Personal Finance (Not Investing)
Topic: Deductible and non-Deductible IRA tax issue
Replies: 6
Views: 1216

Re: Deductible and non-Deductible IRA tax issue

NICKFRANK wrote:I will be paying income taxes on my IRA's for the first time in 2011 due to turning 70.5 in April. Will someone give me an example of how to determine the amount I need to divide by 27.4 to determine RMD. Is it simply subtracting the non-deduct. from the deduct. based on form 8606 records.

Thanks,
Nick
If you turned 70.5 in April 2010 the MRD is the account balance on Dec 31, 2009 divided by 26.5. The nondeductible amount is the % the non deductible portion of IRA bears to the total IRA account value on 12/3/09. See IRS pub 590 P41.
by the intruder
Thu Dec 02, 2010 10:49 am
Forum: Personal Finance (Not Investing)
Topic: Moving Foreign Retirement Assets to the US
Replies: 9
Views: 4675

Re: Moving Foreign Retirement Assets to the US

Has anyone looked into moving assets from a Foreign country to a US retirement account or know of someone who did it? Have any thoughts or helpful resources? The foreign country where my wife is from is allowing the move of her retirement assets which is similar to the IRA/401k, over to the US. The foreign country indicated that it has to be moved to a retirement account and not just any account. It appears to be a tricky thing because Vanguard tells me they don't accept foreign wire transfers because retirement transfers such as 401k transfers are a bit more complex than standard wire transfers. I may have to do it via a Check if the foreign country is willing to issue a check --- which is actually what Fidelity does too as they do not do...
by the intruder
Thu Dec 02, 2010 9:37 am
Forum: Personal Investments
Topic: income over 250K--convert IRAs to Roths???
Replies: 28
Views: 3322

Re: income over 250K--convert IRAs to Roths???

Hi, folks, Just found this board and wonder if you can help me. My husband and I together earn a little over 250K. We have about 310K in savings, not counting our IRAs and my husband's 401K. Our children have 529 savings plans for college, although our son's is still a bit underfunded, but we're not terribly behind in that area. We are considering converting our IRAs to Roths before the end of 2010. But should we???? The 80K question. I call it the 80K question because together we have about 250K in traditional IRAs. About 50K of that was direct contributions over the years. I cannot remember the formula used to figure out what kind of taxes we would pay on this conversion, but a financial planner told me it would be about 80K. We could sp...
by the intruder
Thu Dec 02, 2010 7:49 am
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

In the past, James Lange has advocated converting multiple large traditional IRA (TIRA) accounts to Roth IRA (RIRA) accounts early each year, then recharacterizing all but the best performer near the end of the year. Yes, each one is the size of the desired conversion amount so only one can stay converted. I am doing this (but N only equals 2, seems silly to go above that). Remember, each conversion must go to a distinct Roth, each separate from your "main" Roth, for this to work. I wonder how long the IRS will allow this to happen ... What happens if the value of the Roth IRA that is not recharacterized plummets after the recharacteriztion period (Oct 15 of the following year) expires? It seems that you are still absorbing the d...
by the intruder
Wed Dec 01, 2010 5:30 pm
Forum: Investing - Theory, News & General
Topic: RETIREES- Are you in higher or lower tax bracket now?
Replies: 34
Views: 4784

I answered for an elderly person for whom I am trustee. This person had $200,000 of income in 2009 and paid zero federal tax. Did a Roth conversion this year. How is that possible? Large medical deduction? Can you provide more detail? Just curious ... ML Large medical, municipal bond funds, carryforward business loss. Prior threads on how large segments of the population pay zero or negative tax have been locked and deleted, so better not to discuss further. Got it. Interesintg. Thanks. ML One way to reduce taxes on a Roth conversion is to request to withdraw an application for social security benefits, say at age 70 and return all payments made say since age 62. While the retiree must return all of the SS benefits paid to date the amount ...
by the intruder
Wed Dec 01, 2010 4:55 pm
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

In the past, James Lange has advocated converting multiple large traditional IRA (TIRA) accounts to Roth IRA (RIRA) accounts early each year, then recharacterizing all but the best performer near the end of the year. Yes, each one is the size of the desired conversion amount so only one can stay converted. I am doing this (but N only equals 2, seems silly to go above that). Remember, each conversion must go to a distinct Roth, each separate from your "main" Roth, for this to work. I wonder how long the IRS will allow this to happen ... What happens if the value of the Roth IRA that is not recharacterized plummets after the recharacteriztion period (Oct 15 of the following year) expires? It seems that you are still absorbing the d...
by the intruder
Wed Dec 01, 2010 4:43 pm
Forum: Personal Finance (Not Investing)
Topic: Distributing an inherited IRA and paying off a mortgage
Replies: 34
Views: 4500

Re: Distributing an inherited IRA and paying off a mortgage

Where do you get the idea that the IRA bene will get the IRA funds even if there is a different designation in the will? The executor of the estate will demand that the IRA custodian make payment under the will and the IRA custodian will put a freeze on the distribution until it receives a court order. The executor will have the court issue a temporary restraining order precluding payment untiul the matter is resolved. intruder, I don't know what most IRA custodians would do if they were made aware of will provisions which contradicted the named designated beneficiary on the plan document, but the IRA custodian is the one who decides. The executor has no authority to demand that the IRA custodian turn over the decision to the court. The cu...
by the intruder
Wed Dec 01, 2010 2:16 pm
Forum: Personal Investments
Topic: Convert my Traditional IRA to a Roth IRA?
Replies: 20
Views: 3339

Re: Convert my Traditional IRA to a Roth IRA?

My IRA balance right now it 27K My tax bracket is 25% but it may drop to the 15% tax bracket if I am lucky based on what I put into my 401K for 2010 My bring home pay is 37K per year He has some tIRA and 401k already. His 401k contribution gets him down in the 15% federal bracket and presumably gets him the company match. A Roth contribution appears to be the best next priority based on the limited information we have. The Roth contribution is taxed at 15%, whereas the conversion would be taxed at 25%. I again encourage the OP to post his whole portfolio to get better advice. Dogma ("a belief, principle, or doctrine or a code of beliefs, principles, or doctrines") means advocating a Roth conversion as religion rather than based o...
by the intruder
Wed Dec 01, 2010 12:07 pm
Forum: Personal Finance (Not Investing)
Topic: Distributing an inherited IRA and paying off a mortgage
Replies: 34
Views: 4500

I can't believe this is the state of the law in New York. Although I am admitted to practice there, I'm not familiar with the recent case cited. Do you mean to say that the custodian of an IRA can't rely on the beneficiary designation and pays out to the beneficiary at its own risk? I can't believe that's the law of New York. John See EPTL 13-3.2[d] which allows the designation of a beneficiary in a writing signed by the IRA owner. While the IRA custodian has a contractual obligation to pay the beneficiary designated in the IRA, where there is a dispute over who is the proper beneficiary the custodian will decline to make payment which will result in a decision by the court as to the proper beneficiary. In Matter of Trigoboff, 669 NYS2d 18...
by the intruder
Wed Dec 01, 2010 10:36 am
Forum: Personal Finance (Not Investing)
Topic: Distributing an inherited IRA and paying off a mortgage
Replies: 34
Views: 4500

I can't believe this is the state of the law in New York. Although I am admitted to practice there, I'm not familiar with the recent case cited. Do you mean to say that the custodian of an IRA can't rely on the beneficiary designation and pays out to the beneficiary at its own risk? I can't believe that's the law of New York. John See EPTL 13-3.2[d] which allows the designation of a beneficiary in a writing signed by the IRA owner. While the IRA custodian has a contractual obligation to pay the beneficiary designated in the IRA, where there is a dispute over who is the proper beneficiary the custodian will decline to make payment which will result in a decision by the court as to the proper beneficiary. In Matter of Trigoboff, 669 NYS2d 18...
by the intruder
Wed Dec 01, 2010 10:05 am
Forum: Personal Finance (Not Investing)
Topic: Distributing an inherited IRA and paying off a mortgage
Replies: 34
Views: 4500

Re: Distributing an inherited IRA and paying off a mortgage

Whether the beneficaries of an IRA can be designated in a will depends on state law. In NY courts have upheld the designation of an IRA beneficiary under the will if there is a specific identification of the IRA in the will to be paid to a designated beneficiary. I did not state that the beneficiary of an IRA cannot be designated in a will. What I said was the designated beneficiaries in an IRA account will get the proceeds of the account regardless of whether the estate is settled, and I believe it is also true regardless of what the will says. Other states allow the decedent's creditors to sue the inheritors of non probate assets. Of course it is always true that anyone can sue anyone for anything in any state. I was simply saying that t...
by the intruder
Wed Dec 01, 2010 7:58 am
Forum: Personal Finance (Not Investing)
Topic: Distributing an inherited IRA and paying off a mortgage
Replies: 34
Views: 4500

Re: Distributing an inherited IRA and paying off a mortgage

This is unusual. Most IRA custodians require that IRAs have named beneficiaires and contingent beneficiaries. If individual(s) are named as the beneficiary, once the estate is settled, the IRA balance for which they are named will go to them regardless of what the will says. The IRA will be distributed to the named beneficiaries regardless of whether the estate is settled or not. In fact, the named beneficiaries will get their distribution even if there is no probate estate. The named beneficiaries will get their distribution even if there is no money left over in the probate estate after the debts are paid. Whether the beneficaries of an IRA can be designated in a will depends on state law. In NY courts have upheld the designation of an I...
by the intruder
Wed Dec 01, 2010 7:40 am
Forum: Personal Finance (Not Investing)
Topic: Distributing an inherited IRA and paying off a mortgage
Replies: 34
Views: 4500

Bob's not my name wrote:
kaneohe wrote:
celia wrote:After you distribute the estate, it may make sense to convert your inherited traditional IRA to a Roth. .
I thought I had read that you can't convert an inherited TIRA to a Roth
Me too.
Only a spouse can convert an inherited tIRA to a Roth IRA.
by the intruder
Tue Nov 30, 2010 7:18 pm
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

Ozone: to answer your question you need to answer 3 questions: 1. what portion of the IRA would be exempt from Federal estate under the IRD rules? The greater the exemption the greater the income tax benefit. 2. what portion of the IRD would be allocated to IRA beneficaries? Remember IRD consists of all ordinary income items such as the taxable portion of annuities, not just t-IRAs so only part of the IRD exclusion may be available to the tIRA. 3. what are the tax brackets and ages of the IRA beneficiares? The higher the tax bracket the greater the tax benefits of IRD. The younger the age of the beneficary the longer will be the payout period of the tIRA and the greater the amount of the tax free portion of the MRD. If each beneficiary has ...
by the intruder
Tue Nov 30, 2010 2:07 pm
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

Re: Roth IRA Conversion Myth - It takes years to pay off

This conversion equation doesn't really apply to a 30-year old. He doesn't earn enough to be disallowed from contributing to a Roth, so he isn't concerned with converting. And his tax rate is probably lower than his (future) peak earning years, so his conversion decision would be easier. Andy, do you mean in your second sentence above that because he can contribute directly to a Roth he doesn't need to convert a tIRA to get in the Roth game? And can you elaborate on your third sentence? First, if I'm understanding the second sentence right, the third seems to contradict it. Second, I understand that a young person in a low bracket might be wise to convert, but I don't understand why his peak earning year bracket is really relevant, since i...
by the intruder
Tue Nov 30, 2010 9:53 am
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

Re: Roth IRA Conversion Myth - It takes years to pay off

The Wiki example ignores the effect that high state taxes have on making a Roth conversion a poor investment choice. For example, many single taxpayers in the federal 25% bracket will be above the 33% bracket if they live in OR (9%), CA (9.5%) or NYC (10.5%). If taxpayers in these areas move to a no tax or lower tax state or if their combined tax bracket is less in retirement, the Roth conversion is a poor choice. Also true for a taxpayer who lives his whole life in a state such as Illinois that taxes neither tIRA contributions nor withdrawals, but taxes Roth contributions. Thats weird. PA has its own weird tax rule. PA does not tax any retirement distributions after 59 1/2. While PA does not tax distributions it does tax direct conversion...
by the intruder
Tue Nov 30, 2010 9:17 am
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

Re: Roth IRA Conversion Myth - It takes years to pay off

I think what has been the biggest "Duh!" moment for me was the somewhat obvious illumination that if the income tax on his Roth conversion is 35% (or more) and estate tax is 45%, the savings are not as great as I was erroneously thinking. Unanticipated consequences can quickly eat into the 10% savings. It will be important to see how the dust settles on the income and estate tax issues first then think this strategy through carefully before plotting any course of action. Is it really 10%? If he has a state tax on the conversion, the conversion tax could be higher than 35%. On the other hand, aren't you neglecting the income tax the heirs will pay on the IRA distributions? If he converts to a Roth, the heirs pay no tax on the dist...
by the intruder
Tue Nov 30, 2010 8:35 am
Forum: Personal Finance (Not Investing)
Topic: How to handle accidental after-tax 401k contribution?
Replies: 10
Views: 3037

JW Nearly Retired wrote:
SpecialK22 wrote: If the plan allows it I would definitely rollover the after-tax portion to a Roth IRA. I do this yearly with my after-tax contributions, and it is a very easy process to roll into a Vanguard Roth IRA. I would just make sure your plan allows in-service distributions with no suspension.
Good to know this is allowed without the complicated fairmark hoops.
JW
While a DC plan can permit an inservice rollover of the AT account, the rollover must be a pro rata allocation of contributions and earnings attributable to the AT contributions. If AT funds are rolled over annually there will be little taxable included in income.
by the intruder
Tue Nov 30, 2010 8:04 am
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

Re: Roth IRA Conversion Myth - It takes years to pay off

I am pretty skeptical of converting at a rate you believe to be higher than your rate in retirement, especially if the difference is large. Yes, the fact that you effectively have more (after-tax) assets in the Roth has value, but not that much. As an example, if you converted to a Roth at 33% today (with a 25% rate in retirement) you would still be worse off after 40 years. The alternative of keeping the TIRA and the taxable account is superior under those circumstances (assumed 15% rate on dividends and cap gains, with a total return of 8% annually). A similar example is worked out in Roth IRA conversion on the wiki. It's not worth converting in a 33% bracket if you will retire in a 25% bracket, but it is worth converting in a 28% bracke...
by the intruder
Mon Nov 29, 2010 11:10 am
Forum: Investing - Theory, News & General
Topic: Can I retire? by Mike Piper -- rollover question
Replies: 13
Views: 2630

Another point: It's a good idea to roll your 401(k) into an IRA rollover account, and keep your (traditional) IRA separate. Federal laws give protection against lawsuits of up to $1.5 million for a traditional IRA, another $1.5 million for an IRA rollover. It's possible to fold 401(k) money into a traditional IRA, but then you'll only have protection up to $1.5 mill instead of $3 million. (And when you roll 401(k) money into a traditional IRA, you can't later roll the money out into another 401(k).) Steve....do you have a source for this info.........I thought the protection under bankruptcy was 1M for TIRA and unlimited for rollovers from qualified plans. For commingled....it was uncertain . K: You will not find a cite because everything ...
by the intruder
Sun Nov 28, 2010 6:02 pm
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

Bob :

The gift of capital assets duing life has an estate tax benefit in that appreciaton of the property after transfer is excluded from the estate. If the property is worth $1M on date of gift but $1.25M on the date of death of the transferror, the transferror's estate has been reduced by $1.25M but for gift tax purposes the gift was not taxable because it was $1M.
by the intruder
Sun Nov 28, 2010 5:15 pm
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

Re: Roth IRA Conversion Myth - It takes years to pay off

Thanks for your reply. 2. Distributions of earnings are not subject to income tax after the IRA is in existence for 5 tax years and the distribution is paid on account of death. If owner dies before the IRA has been in existence for 5 years the income can be deferred to the fifth year. Heirs will take RMDs based on their own life expectancies, not 5-year rule. 3. If the owner has maxed out on annual gifts he could still give $1M away without being subject to gift tax. No estate tax benefit due to unified credit, right? 4. There are many way to reduce income tax on Roth conversions such as using up business losses that appear on the 1040, excess charitiable contribution carryforwards, passive losses on RE investments if AGI does not exceed ...
by the intruder
Sun Nov 28, 2010 2:04 pm
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

Re: Roth IRA Conversion Myth - It takes years to pay off

1. If the heirs are in a lower tax bracket at distribution then it would be better to leave the t-IRA to them instead of paying higher taxes on the conversion. 2. After the t-IRA is converted, a distributon of the the earnings from the Roth within 5 years of the conversion will be taxable. 3. There are other estate planning techniques that are more tax efficient. For example instead of paying $25,000 to the IRS on a Roth conversion to reduce their estate, a married couple could reduce their estate by giving $25,000 to an heir (No gift tax). Or give $50,000 to 2 heirs without any gift tax. Same estate tax effect as a conversion but at least their money stays in the family. 4. Converting to a Roth could have unexpected tax consequences such ...
by the intruder
Sun Nov 28, 2010 9:26 am
Forum: Personal Investments
Topic: Roth husband wife 10 year age difference
Replies: 20
Views: 2211

Assume the IRA doubles in value before withdrawal, and assume a 33% federal + state tax rate: Mfinal tIRA = 2*Minitial*0.67 Mfinal Roth = 0.67*Minitial*2 Wow! You sure put that simply. I have mentally strugged with yes this, then that along with but then this and you get that. Thanks. At ages 57 and 47 its pretty hard to have much of an idea of tax rate when you withdraw especially given a full-productive life right now. One given is the tax rate now. I do a lot of work on figuring out taxes and have some confidence in this area. This advantage does not exist if you are not maxing out all your tax advantaged vehicles, because instead of using the funds to pay the conversion tax you could just contribute those funds to a tIRA, Roth, or 401k...
by the intruder
Fri Nov 26, 2010 11:32 am
Forum: Personal Finance (Not Investing)
Topic: Credit impact of debt collection
Replies: 3
Views: 1080

Re: Credit impact of debt collection

I just came across a letter from a debt collection agency acting on behalf of the Virginia Department of Taxation saying that I owe a balance of $40. The backstory is that I used to be a resident of VA in 2008. Since then I've moved around quite a bit including separate deployments to Iraq and Afghanistan. I had my mail forwarded to my parent's house and asked them to keep me informed of any important mail. Unfortunately, after returning from Afghanistan last week my parents gave showed me this letter from the debt collector dated from late October. They tried to take care of this themselves by contacting the collector but never informed me. They left a phone message but haven't had any follow up since. If you are still in service you need...
by the intruder
Wed Nov 24, 2010 1:40 pm
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

Thank you all for pointing out some of the many nuances to consider. So at the risk of hijacking my own post, let's take a real case: my father. He is a single widower, 87 years old and in reasonably good physical health (but with dementia). He has the following major assets: -- Traditional IRAs: $4M -- Taxable accounts: $2M -- Condominium with market value of $1M and $500K mortgage balance. RMD's from the T-IRA's are roughly $350k annually so he's in the top marginal income tax bracket. Let's assume that the sum of his assets are above the estate tax exclusion (when Congress finally figures that out) whether that be $1M or $3.5M. He wants his two children to inherit as much of his estate as possible. What would you suggest? Should he conv...
by the intruder
Wed Nov 24, 2010 10:37 am
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

Re: Roth IRA Conversion Myth - It takes years to pay off

The reasoning is that it will take years for tax-free earnings inside the Roth to match the tax bill you have to pay going in. Why would someone think it is important for the Roth earnings to at least match the taxes that will have to be paid? The taxes will have to be paid regardless or not of the Roth having earnings that exceed the taxes. One way of looking at it that is not often discussed involves the estate tax. Whether or not the tax issue on estates is resolved soon, the estate value consists of the value of all assets, even those that are tax-deferred, or have mortgages or loans against them (the full market value, separate from the taxes or loans that are due on those assets, will be the basis for calculating estate taxes). So if...
by the intruder
Wed Nov 24, 2010 10:15 am
Forum: Personal Finance (Not Investing)
Topic: Roth IRA Conversion Myth - It takes years to pay off
Replies: 52
Views: 9524

Re: Roth IRA Conversion Myth - It takes years to pay off

I recently read this in Kiplinger's magazine and was so surprised by this tidbit that I thought I would share it. Perhaps I'm the last to know. http://www.kiplinger.com/magazine/archives/7-myths-about-roth-ira-conversions.html We’ve seen elaborate mathematical support for the proposition that if you’re already retired -- or you’re within a few years of retirement – it’s unlikely you’ll benefit from converting. The reasoning is that it will take years for tax-free earnings inside the Roth to match the tax bill you have to pay going in. That seems logical. After all, it’s likely to cost $25,000 or more to convert a $100,000 IRA. But remember that the tax bill on the conversion is a bill that you (or your heirs) will have to pay someday, even...
by the intruder
Tue Nov 23, 2010 10:39 pm
Forum: Personal Finance (Not Investing)
Topic: CFP okay for completing tax returns? Or go with CPA?
Replies: 15
Views: 2087

Re: CFP okay for completing tax returns? Or go with CPA?

Someone recommended a CFP who has a business completing taxes. I'm thinking that it would be beneficial to have a CPA instead, especially in the case of an audit. Does it matter? Should I go ahead and interview the CFP, or look only for a CPA? Thank you! Is the CFP going to sign as the paid preparer on the tax form? Signing the return is not optional. Anyone who prepares a tax return for another, and charges a fee for the service, is required to sign the tax return as "paid preparer." Mark I asked the Q because maybe the CFP is not going to charge for the tax return. The facts did not state that the CFP would be paid. Therefore it is possible that the CFP will not have to sign as a paid preparer. Or maybe the CFP is also a CPA or...
by the intruder
Tue Nov 23, 2010 10:24 pm
Forum: Personal Investments
Topic: Tax Planning: 2010 the year to roll a trad IRA into a ROTH?
Replies: 8
Views: 1860

If you convert (not a rollover) the $2000 t-IRA to a Roth IRA by Dec 31, 2010 you have until Oct 15, 2011 (if you file for an extension) to elect one of the following options: If you wait until January of 2011 to do the conversion you can bump all the dates mentioned up by a year and you may qualify for a lower rate if you are deployed next year. However, only in 2010 do you have the option to pay the taxes for either 2010 or for 2011 and 2012. If you convert in 2011, you must pay the taxes for 2011 (in April 2012), at whatever your 2011 rate happens to be. Watty: If the OP converts in 2010 he will still have the option to include the conversion income only in 2011 by recharacterizing back to a t-IRA in 2011 and the reconverting to a Roth ...
by the intruder
Tue Nov 23, 2010 5:13 pm
Forum: Personal Finance (Not Investing)
Topic: CFP okay for completing tax returns? Or go with CPA?
Replies: 15
Views: 2087

Re: CFP okay for completing tax returns? Or go with CPA?

JLB123 wrote:Someone recommended a CFP who has a business completing taxes. I'm thinking that it would be beneficial to have a CPA instead, especially in the case of an audit. Does it matter? Should I go ahead and interview the CFP, or look only for a CPA?
Thank you!
Is the CFP also a CPA, enrolled agent or tax preparer?

Is the CFP going to sign as the paid preparer on the tax form?
by the intruder
Tue Nov 23, 2010 4:59 pm
Forum: Personal Finance (Not Investing)
Topic: Do you use an escrow account for your mortgage?
Replies: 68
Views: 19337

No escrow. I take my estimated annual property tax and insurance payment amounts and divide it by 26. Each time I receive a paycheck, this amount is transferred automatically to my online bank savings account where it earns interest. By the end of the year, I have the amount of cash I need to pay that annual property tax and insurance amount. On Dec. 31st of each year, I pay my property tax payment on my credit card receiving 2.5% cash back. One month later, I use the cash in the online bank savings account to pay off the credit card. By my calculations, this will save me around $200 (cash back + interest earned) compared to escrowing with my mortgage company. If the rate on my online bank savings account rises then the savings grow. Who i...
by the intruder
Mon Nov 22, 2010 3:26 pm
Forum: Investing - Theory, News & General
Topic: Why the Roth IRA Bias?
Replies: 133
Views: 34601

Could you provide a example as to how delaying RMDs to 70 1/2 would increse one's tax bracket taking into account that tax brackets are adjusted for inflation. Thought provoking, but if we consider everything in real (as opposed to nominal) terms, perhaps not such a puzzle. Let's turn it around and assume no inflation. I'm in the 15% tax bracket now (retired at 55, now 58 ), but would be in at least the 25% marginal bracket if I were taking distributions from my IRAs now. If projecting into the future with inflation, shouldn't we adjust everything up (e.g., my IRA balance), not just the tax brackets? I hope my IRA at least keeps up with inflation. Thus, thinking in terms of real dollars, it seems to me that if taking RMD now would push me ...
by the intruder
Mon Nov 22, 2010 10:14 am
Forum: Personal Investments
Topic: Tax Planning: 2010 the year to roll a trad IRA into a ROTH?
Replies: 8
Views: 1860

Re: Tax Planning: 2010 the year to roll a trad IRA into a R

Hello, This is a quick tax-related question. I have a $1700 traditional IRA from a previous year when I needed to reduce my AGI to qualify for a tax credit. It is up about $300 from the purchase price. I have already maxed out my ROTH IRAs for 2010. Does it make sense to roll over the Traditional IRA to a Roth? Can I even do that as I've maxed out the Roth's? For 2010, we are in the 15% tax bracket. Future tax situation: I expect to have an AGI of $40K to $70K for CY 2011-2013. We are moving soon and my wife may or may not work, hence the variance. Depending on whether Congress renews the Bush tax cuts and whether my wife works. that could put us in the 15-25% bracket. The only caveat is that I'm active duty military; if deployed to a comb...
by the intruder
Sun Nov 21, 2010 5:58 pm
Forum: Personal Finance (Not Investing)
Topic: Tax Act 2010 FREE version available for download
Replies: 5
Views: 2001

Re: Tax Act 2010 FREE version available for download

Tax Act 2010 free version is available at http://www.taxact.com/tax-preparation/free-tax-software.asp Note that the AMT patch has not been passed into law and the program as coded may give surprising results although for planning purposes you can elect to use the higher exemption amount of last year. I believe the Filing deadline is April 18 because Emancipation day (normally April 16) falls on a Saturday and is therefore celebrated on April 15. IRS is closed for that so everyone gets until Monday April 18. Without knowiing whether Congress will enact any end of tax changes for 2010 isnt it premature to calculate 2010 taxes? It is also possible that Congress could enact changes in 2011 that apply to 2010 such as the AMT patch. Possibly; bu...
by the intruder
Sun Nov 21, 2010 5:27 pm
Forum: Personal Finance (Not Investing)
Topic: Tax Act 2010 FREE version available for download
Replies: 5
Views: 2001

Re: Tax Act 2010 FREE version available for download

pshonore wrote:Tax Act 2010 free version is available at http://www.taxact.com/tax-preparation/f ... ftware.asp

Note that the AMT patch has not been passed into law and the program as coded may give surprising results although for planning purposes you can elect to use the higher exemption amount of last year.
I believe the Filing deadline is April 18 because Emancipation day (normally April 16) falls on a Saturday and is therefore celebrated on April 15. IRS is closed for that so everyone gets until Monday April 18.
Without knowiing whether Congress will enact any end of tax changes for 2010 isnt it premature to calculate 2010 taxes? It is also possible that Congress could enact changes in 2011 that apply to 2010 such as the AMT patch.
by the intruder
Sun Nov 21, 2010 7:52 am
Forum: Personal Investments
Topic: Deferred Comp Plan--keep it or leave it?
Replies: 8
Views: 1728

If your employer files for bankruptcy your non qualified deferred comp is subject to the claims of the employer's creditors. Are you willing to take the risk of not getting paid? If you delay your payment beginning 2011 when would be the next time that you start your distributions? I thought there is a 5 year delay if you defer receiving a scheduled payment. You need to check with the plana administrator to find out what is the earliest date you could receive distributions if you elect to defer your 2011 payment. Also I thought under IRS rules you must request a delay in a scheduled distribution at least 12 months before the date the distribution is to commence. At this time it may not be possible to delay the comencement of distributions. ...
by the intruder
Sat Nov 20, 2010 3:58 pm
Forum: Personal Investments
Topic: The "New" Muni Fund Outlook: Today's WSJ Analysis
Replies: 23
Views: 3714

There is no spread when you buy the bonds at par, e.g., new issue. http://www.munibondadvisor.com/UnderwritingSpread.htm Also Google "muni bond yield burning". Adrian anenu@tampabay.rr.com The article comfirms my statement that there is no spread when bonds are purchased at par in a new issue. "For new bond offerings when bonds are sold to the public at a price of 100% [par] the rates on the bonds and the yields are the same as indicated in the following example." All bonds are sold with a fee paid to the underwriting syndicate that guarantees payment to the issuer usually about 5% of the issue. If a municipality issues $100,000,000 in bonds paying 4% the municipality nets $95M and the underwriting syndicate gets $5M. H...
by the intruder
Sat Nov 20, 2010 1:17 pm
Forum: Personal Investments
Topic: The "New" Muni Fund Outlook: Today's WSJ Analysis
Replies: 23
Views: 3714

Adrian Nenu wrote:
Vanguard Intermediate Term Tax-Exempt (VWITX) mentioned as a high-quality fund.
No reason to own individual munis when Vanguard offers good diversification (especially important now) at a very low cost. The diversification aspect is overlooked by people who recommend buying individual muni bonds. Then they pay huge spreads when they buy individual munis. Big mistakes in my opinion.

Adrian
anenu@tampabay.rr.com
There is no spread when you buy the bonds at par, e.g., new issue.

Some corporate fixed income securities can be purchased at a discount and then put back to issuer at par upon the death of the owner.
by the intruder
Sat Nov 20, 2010 11:00 am
Forum: Personal Finance (Not Investing)
Topic: Longevity Insurance Instead of LTC
Replies: 9
Views: 2915

Re: Longevity Insurance Instead of LTC

I have been shopping for LTC insurance for my 48 year old healthy wife. I have issues that make me uninsured. I have more or less concluded that the cost and ability of honestly covering LTC risks are high, hard to do and not at all clear. But I am wondering about "Longevity Insurance" that would kick in around age 80, if either she or I or both survive? Yes, I am mixing problems but they are related. Where can I get quotes on this type of coverage? And what might I need to consider? There several risk associated with this product including what happens if the insured dies before 80. Some policies wil pay nothing and others will only pay back the premium without interest. Also what happens if the insured dies shortly after the pa...
by the intruder
Sat Nov 20, 2010 10:32 am
Forum: Investing - Theory, News & General
Topic: Charlie Rose show on MBS
Replies: 2
Views: 958

Re: Charlie Rose show on MBS

baw703916 wrote:Right now I'm watching Charlie Rose interviewing the authors of a new book on the development of mortgage-backed securities. Not the financial crisis per se, but more the history of how the whole system evolved.

Quite informative and interesting IMO.

Just thought I'd share that with other Bogleheads if they want to catch the program--no political comments please.

Brad
The best history of the securitizaton of residential mortgages is in Liar's Poker where Michael Lewis describes how Salomon Brothers created the market for securitizing home mortgages and then was overwhelmed by the competition a few years later.
by the intruder
Sat Nov 20, 2010 7:40 am
Forum: Personal Finance (Not Investing)
Topic: Do you use an escrow account for your mortgage?
Replies: 68
Views: 19337

Unless you live in a state like CA where you get 2% interest there is no reason to give a bank an escrow account since all banks adjust the escrow payment upward each year for increases in property taxes. I would rather invest the funds that would otherwise be held in escrow in a savings account.
by the intruder
Fri Nov 19, 2010 6:47 pm
Forum: Investing - Theory, News & General
Topic: Negative Article About Investing in the Stock Market on HP
Replies: 22
Views: 2816

For retired Colonel Roger Potyk, the flash crash was the last straw. In 2008, Potyk and his wife lost $75,000 on the Lehman Brothers bond they held when the bank collapsed. Why would a retired Colonel held $75,000 in a single company bond? I also wondered about that. Why not a bond index fund? I did a double take when I saw that. OMFG. :shock: Because most investors believed to the end that Lehman woud not default. Bill Miller of Legg Mason kept buying LEH stock right up until the end because he believed it would rebound. When asked when he would stop buying LEH he was reported to reply " when it goes to 0." The NJ state pension fund invested about $120M in LEH stock in June 2008 when LEH was trading at about 28 because it wanted...
by the intruder
Fri Nov 19, 2010 10:08 am
Forum: Personal Finance (Not Investing)
Topic: Federal tax on co-owned home sale
Replies: 17
Views: 3008

John/Hondo......thanks for clarifying. so this must one of rare cases when spouses are treated worse? I wonder what the reasoning was? No the law was intended to benefit spouses who are joint tennants by the entirety by treating the surviving spouse as owner of 1/2 of the property even if they did not provide any funds to purchase the property which reduces the assets in the deceased's spouses estate subject to estate tax. This provision was enacted before there was an unlimited marital deduction when the exemption of property from the estate tax was much less, e.g, $250,000, in order to reduce the estate tax on property inherited by a surviving spouse. The spouse benefits over a non spouse because 50% of the FMV is stepped up and a surviv...