## Search found 319 matches

Mon Mar 20, 2023 4:54 am
Forum: Personal Finance (Not Investing)
Topic: Suspend Social Security for new job?
Replies: 8
Views: 673

### Re: Suspend Social Security for new job?

Silk McCue wrote: Mon Mar 20, 2023 1:05 am
Navillus1968 wrote: Sun Mar 19, 2023 11:04 pm

OP's friend is forgoing \$1350/month for 15 months= \$20,250.

At 70, her benefit will be \$1350 x 1.1= \$1485/month.

Breakeven number of months after 70: \$20,250/1485= 13.6 months.
The break even analysis you performed is fatally flawed.

Your numbers only show how long it takes to earn what they would have earned up until age 70. It then ignores that they would have continued to earn that in the 13.6 months that you claim achieves break even.

The real break even is 12.5 years (150 months) . \$20,250 / (\$1485- \$1350) = 150 months.

Cheers
Oops- that's why posting after midnight is a bad idea! Appreciate the correction. It did seem too good to be true.
Sun Mar 19, 2023 11:04 pm
Forum: Personal Finance (Not Investing)
Topic: Suspend Social Security for new job?
Replies: 8
Views: 673

### Re: Suspend Social Security for new job?

123 wrote: Sun Mar 19, 2023 10:38 pm
Navillus1968 wrote: Sun Mar 19, 2023 9:49 pm ...A 10% raise that lasts forever sounds pretty good...
It would depend on how long her "forever" turns out to be.
OP's friend is forgoing \$1350/month for 15 months= \$20,250.

At 70, her benefit will be \$1350 x 1.1= \$1485/month.

Breakeven number of months after 70: \$20,250/1485= 13.6 months. Note- this doesn't factor in the taxes owed on the 15 months of SS while she is working full-time, which reduces the numerator.
People get hit by buses, but OP's friend has a decent chance of making it to 71 if she's fit enough to work 40 hours a week at age 68 and counting.
Sun Mar 19, 2023 10:50 pm
Forum: Personal Finance (Not Investing)
Topic: Understanding an Inherited IRA under the Secure Act
Replies: 6
Views: 520

### Re: Understanding an Inherited IRA under the Secure Act

I read the Wiki and a few other resources and wanted to check my understanding of the rules to inheriting and IRA to make sure it is correct. If I am a non-spouse beneficiary and do not qualify as an "eligible designated beneficiary", and the original owner has started taking RMD's, then I must take RMD over a 10 year period. Furthermore, if the original owner already made a RMD for 2023, then I must start my RMD in 2024. I am not interested in taking a lump-sum. Sound correct? You mention the IRA owner taking a 2023 RMD, so it's clear you inherited a Traditional IRA, yes? You are correct that the IRA owner having started RMDs means you must continue RMDs. As you note, you must also liquidate the inherited IRA by 31 DEC of the 10...
Sun Mar 19, 2023 9:49 pm
Forum: Personal Finance (Not Investing)
Topic: Suspend Social Security for new job?
Replies: 8
Views: 673

### Re: Suspend Social Security for new job?

Have your friend plug her numbers into https://opensocialsecurity.com/

If suspending benefits makes sense, the calculator will recommend it. I would bet money that suspending her SS is the way to go- build DRC & avoid taxes on her SS benefit, it's a win-win.

A 10% raise that lasts forever sounds pretty good.

SSA will restart her benefits automatically at 70, but she also has the option to restart them by contacting SSA at any time prior to 70. https://www.ssa.gov/benefits/retirement ... spend.html

PS- Your friend will have to pay her Medicare bill separately, since withholding it from a suspended SS benefit is not a thing.
Sat Mar 18, 2023 7:40 pm
Forum: Personal Finance (Not Investing)
Topic: SS Spousal Benefit including Death?
Replies: 18
Views: 1890

### Re: SS Spousal Benefit including Death?

Your golfing buddies are correct if they were referring to SS spousal benefits, not survivor (widow/er) benefits". Spousal benefits based on a spouse's yet to be claimed benefits are zero because spouse's benefits have not started. That only leaves the survivor benefit. OP here. What is the value of a "spousal benefit" versus a "survivor benefit"? Your wife has the possibility of up to three SS benefits, depending on her work history. 1. Her own SS retirement benefit. For this to be available, your wife has to accumulate 40 quarters of employment & be at least 62. 2. A spousal benefit that is based on your SS retirement benefit. For this to be available, the worker (you) has to have begun taking his retirement ...
Sat Mar 18, 2023 5:01 pm
Forum: Personal Investments
Topic: Social Security Timing & Roth Conversions
Replies: 16
Views: 1595

### Re: Social Security Timing & Roth Conversions

some additional info based on above comments my wife's early SS at age 64 in Jan 2024 will be ~\$24k/yr my SS at age 70 in Jun 2026 will be ~\$55k/yr (current calculations but assume it will be higher due to COLA) \$150k in Roth conversions will put you in the middle of the 22% marginal tax rate, adding \$24k of SS benefit (\$20.4k taxable income) won't change that. taxable accounts total ~\$1.5m AA 65/35 - can fund living expenses and Roth taxes from taxable until SS or RMD's hit T-IRA ~\$3m AA 55/45 R-IRA - \$160k AA 100% equities current spending \$140k to \$175k annually (includes \$40k or more for non-essentials like gifts, charities, grandkids 529, multiple vacations, etc.) - from taxable we will sell mutuals or stocks and pay capital gains if/...
Sat Mar 18, 2023 1:07 pm
Forum: Personal Investments
Topic: Social Security Timing & Roth Conversions
Replies: 16
Views: 1595

### Re: Social Security Timing & Roth Conversions

some additional info based on above comments my wife's early SS at age 64 in Jan 2024 will be ~\$24k/yr my SS at age 70 in Jun 2026 will be ~\$55k/yr (current calculations but assume it will be higher due to COLA) \$150k in Roth conversions will put you in the middle of the 22% marginal tax rate, adding \$24k of SS benefit (\$20.4k taxable income) won't change that. taxable accounts total ~\$1.5m AA 65/35 - can fund living expenses and Roth taxes from taxable until SS or RMD's hit T-IRA ~\$3m AA 55/45 R-IRA - \$160k AA 100% equities current spending \$140k to \$175k annually (includes \$40k or more for non-essentials like gifts, charities, grandkids 529, multiple vacations, etc.) - from taxable we will sell mutuals or stocks and pay capital gains if/...
Fri Mar 17, 2023 9:36 pm
Forum: Personal Investments
Replies: 8
Views: 747

Can I give the contents of my Fidelity brokerage account to someone else who also has a Fidelity account? My account is composed of ETF's and they will not be sold by either myself nor the person who will receive them. Is this going to be a taxable event for either one of us? Thank you very much for any help. Neither the donor (you) nor the donee (recipient of the gift) will pay taxes on your gift when the gift is made. However, the EFTs you gift carry with them your cost basis, so that if the donee ever were to sell the shares, their capital gains would be calculated on the price you paid & taxes would be due at that point. There are some exceptions (donations to charity, death of the donee), but that's the gist. If your gift exceeds ...
Fri Mar 17, 2023 6:27 pm
Forum: Personal Investments
Topic: Social Security Timing & Roth Conversions
Replies: 16
Views: 1595

### Re: Social Security Timing & Roth Conversions

This may be a repetitive or redundant question but I am wondering how others in similar situations feel - My current plan is to defer my SS till age 70 (will be 67 in June 2023), do moderate Roth conversions up thru 2025 (\$100k to \$150K) What size are your tax-deferrred accounts today & how large do you expect your RMDs to be in 6 years? https://www.schwab.com/ira/ira-calculators/rmd Any particular reason you plan to stop Roth conversions after 2025? RMDs shouldn't begin until 2029, yes? Why not continue the conversions at a lower level once the TCJA brackets revert? In general, you want to avoid a low-tax trough in your 60s income followed by a permanent spike in marginal tax rates in your mid/late 70s caused by RMDs & SS. Better ...
Thu Mar 16, 2023 7:35 pm
Forum: Personal Investments
Topic: Bond Allocation to TSP G Fund
Replies: 21
Views: 1209

### Re: Bond Allocation to TSP G Fund

Hello! I'm a new federal government employee and am considering allocating the entirety of my bond allocation to the G Fund. My rationale is that the G fund is zero risk and so this would let me tweak the remainder of my portfolio towards riskier investments, while keeping my overall risk the same. Both my spouse and I are in our mid 40s and we have one child in elementary school. The total portfolio amount is mid six figures. Some questions: 1. Is this plan reasonable or do you think that there is a better way to proceed? 2. My existing allocation is 60/40. How far can I modify this while keeping the overall risk the same - 65/35, 70/30, 75/25? I'm not sure how I would go about calculating this. I did search the forum - although there is ...
Thu Mar 16, 2023 5:52 pm
Forum: Personal Finance (Not Investing)
Topic: SS Spousal Benefit including Death?
Replies: 18
Views: 1890

### Re: SS Spousal Benefit including Death?

I searched this forum yet did not find the definitive answer to my question, which is: "What happens to a deceased person's unclaimed Social Security benefits with respect to a surviving spouse?" Yes, it is a personal scenario. I am 68 years old, my wife is 59 years old. I plan to draw my Social Security when I reach 70 years old. My golf buddies (who are typically knowledgeable on these susbjects), state that my wife will not receive any of my SS benefits if I die before I begin withdrawing my SS. 1. Your golf buddies are full of beans. 2. SS Survivor benefits exist separately from your wife's own SS retirement benefit (if she has one) & there is an optimal claiming strategy for any given mix of the two benefit amounts &...
Thu Mar 16, 2023 2:29 pm
Forum: Personal Finance (Not Investing)
Topic: SS Spousal Benefit including Death?
Replies: 18
Views: 1890

### Re: SS Spousal Benefit including Death?

I searched this forum yet did not find the definitive answer to my question, which is: "What happens to a deceased person's unclaimed Social Security benefits with respect to a surviving spouse?" Yes, it is a personal scenario. I am 68 years old, my wife is 59 years old. I plan to draw my Social Security when I reach 70 years old. My golf buddies (who are typically knowledgeable on these susbjects), state that my wife will not receive any of my SS benefits if I die before I begin withdrawing my SS. 1. Your golf buddies are full of beans. 2. SS Survivor benefits exist separately from your wife's own SS retirement benefit (if she has one) & there is an optimal claiming strategy for any given mix of the two benefit amounts &...
Thu Mar 16, 2023 8:55 am
Forum: Personal Investments
Topic: Fidelity 401(k) fees
Replies: 8
Views: 591

### Re: Fidelity 401(k) fees

Depending on your age at retirement, you could easily do a rollover of your 401k to an IRA at Schwab, Fidelity, Vanguard (or a host of other discount brokers), begin withdrawing money and never pay an annual fee again. This option requires you to reach age 59.5, although there are other ways to access IRA money before 59.5 penalty-free.

If you retire after 55 but before 59.5, your last employer's 401k offers penalty-free withdrawals. This option is not a feature of any type of IRA. If you retire after 59.5, this point is moot.
Thu Mar 16, 2023 8:26 am
Forum: Personal Investments
Topic: Do Roth IRA Contributions Count Toward Your 401(k) Limit?
Replies: 7
Views: 675

### Re: Do Roth IRA Contributions Count Toward Your 401(k) Limit?

Do Roth IRA Contributions Count Toward Your 401(k) Limit? Investopedia is clear enough on this question--or seems to be: "No, Roth IRA contributions do not count toward your 401(k) limit. However, Roth IRA contributions do count toward your total IRA limit. So, if you contribute to both a Roth and a traditional IRA, then the combined amounts can’t exceed the annual contribution limit." Just checking, though: A friend of mine has worked thus far this year on a 1099 basis and contributed the max \$6,500 to her self-directed Roth IRA. In April, though, she will begin working for the federal government, where she would like to max out her TSP with the limit of \$22,500. My reading of Investopedia suggests that this is fine. Do you agre...
Wed Mar 15, 2023 6:51 pm
Forum: Personal Investments
Topic: Help me pick between these 2 pension plans
Replies: 41
Views: 2831

### Re: Help me pick between these 2 tax brackets (now and then)!!!

Although I don’t know what tax rate we’ll be in in retirement, I assume it will be lower. I say this because our biggest expenses (besides tax) will be gone. Mortgage, student loans, childcare. These things alone are nearly 40% of our income, so my assumption is we won’t need our full income in retirement. Maybe only half, or 60%. Maybe that’s a wrong assumption. There are many wealthy people on this forum. But most retired Americans are not wealthy. Once you're a bit older and have saved a nice pile, you can start worrying about RMDs. For you, today, Roth is not a good choice, IMO, and even more so because (based on your other post) you're trying to find ways to save money. Deferring taxes saves a lot of money. I’ve been doing a deep dive...
Wed Mar 15, 2023 2:18 pm
Forum: Personal Finance (Not Investing)
Topic: TCJA sunset and pre-2018 gifts
Replies: 4
Views: 469

### Re: TCJA sunset and pre-2018 gifts

Wed Mar 15, 2023 1:51 pm
Forum: Personal Finance (Not Investing)
Topic: Inherited IRA fully taxed at transfer?
Replies: 22
Views: 1922

### Re: Inherited IRA fully taxed at transfer?

OP here. Sorry for any confusion. Account Titles at EJ are as follows. Statements for all three are mailed as one portfolio listed as "Portfolio for dead son's name" at top and addressed to dead son c/o 90 year old's name. Individual Retirement Account Select--dead son's name \$331K (later called in EJ Documents Traditional IRA and Edwards Jones Trust Co As Cust/FBO dead son IRA C/O 90 year old) Single Account Select--90 year old's name \$171K (later called in EJ documents "Single, TOD-Select") Individual Retirement Account Select-90 year old's name 19K (later called in EJ Documents Traditional IRA and "Edwards Jones Trust Co As Cust/FBO 90 year old's name IRA) At the top of each page under account holder dead son is...
Wed Mar 15, 2023 10:21 am
Forum: Personal Finance (Not Investing)
Topic: Budget review for 200,000 income
Replies: 102
Views: 8387

### Re: Budget review for 200,000 income

Regarding home/mortgage: Mortgage is 30 year, 608k at 3.6%, 27 years left. When I objectively look at our numbers, this is the big one for me. It’s 18.5% of gross and approximately 25% of take home. I really thought everyone would be all over that number, which isn’t that helpful because that’s really the one line item we won’t change. We have 55 acres which was farmed by my great grandfather, eventually sold, and I’ll be damned if it didn’t go for foreclosure 5 years ago after changing hands a few times. We built a home on it 2 years ago. I’ve wanted this land since I was a boy. Do the numbers necessarily make sense especially when considering the big elephant of the student loans? No. But there’s more to it than numbers. It’s a visceral ...
Tue Mar 14, 2023 11:30 pm
Forum: Personal Investments
Topic: Tax exemption for treasury interest in an IRA?
Replies: 5
Views: 674

### Re: Tax exemption for treasury interest in an IRA?

Hi All, I looked all around the internet and this forum but couldn't find a clear answer. I know for taxable accounts that treasuries are exempt from state and local tax. However, when buying a treasury with a tax advantaged IRA account will the withdrawals of that accrued interest/dividends be exempt from state and local tax as well? I'm with Schwab so if it is then is Schwab tracking how much treasury interest that are state/local tax exempt? Right now CDs are about 50 basis point higher so if not I would probably go with CDs but if they are exempt I might go with treasuries when I withdraw them at retirement. Trad IRAs are great for tax-deferred growth & not-so-great for ordinary income taxation of withdrawals. Short answer is no- a...
Tue Mar 14, 2023 10:49 pm
Forum: Personal Finance (Not Investing)
Replies: 24
Views: 3542

### Re: Advice for retiring loved one who missed out on Bogleheads

It sounds like your relative has done well with his 90% stock/10% cash AA. With about \$100-120K in cash, he has about 3 years of living expenses isolated from the swings of the stock market. Instead of fundamentally changing his investment strategy, you might just QA a few things- Verify that his cash is earning a decent amount of interest in a HYSA or CDs, etc., rather than just sitting in a sweep account or checking account. Do you know his taxable/tax-deferred/Roth percentage? You might ask him if he has considered what his RMDs will be at 73? Perhaps partial Roth conversions post-retirement would make sense to bring down RMDs, especially if one of the couple predeceases the other & has to file Single? Has he considered his SS claimi...
Tue Mar 14, 2023 7:22 pm
Forum: Personal Finance (Not Investing)
Topic: 2nd Marriage Social Security Question
Replies: 8
Views: 827

### Re: 2nd Marriage Social Security Question

Allan wrote: Tue Mar 14, 2023 6:20 pm I posted this question on another thread and decided to re-ask the question here. I am re-marrying in a few months, both of us are over 70. I didn't start my Soc Sec until 70, therefore my benefit is higher than my soon-to-be spouse. If I should pass away would my wife be able to take my higher benefits?
The marriage has to last nine months for the new wife to qualify for survivor benefits. AARP- "In most cases, a widow or widower qualifies for survivor benefits if he or she is at least 60 and had been married to the deceased for at least nine months at the time of death." https://www.aarp.org/retirement/social- ... -dies.html

I'd put off the sky-diving lessons for a while...
Tue Mar 14, 2023 7:08 pm
Forum: Personal Investments
Topic: Help me pick between these 2 pension plans
Replies: 41
Views: 2831

### Re: Help me pick between these 2 pension plans

Tue Mar 14, 2023 6:08 pm
Forum: Personal Finance (Not Investing)
Topic: Excess 401(k) deferrals that weren't really...
Replies: 10
Views: 756

### Re: Excess 401(k) deferrals that weren't really...

Hey, thanks for another clue! If I assume the net permitted contribution of c. \$12k included all of my catch-up \$, that should give me an idea of what the (then-) permitted max was... Maybe. ADP has always allowed anything in the range [1,90]% of paycheck. Haha, great. I would inform ADP ASAP that you have likely already over-contributed for 2023. They will figure it out soon enough, but better to get the ball rolling. The sooner they cut you a check, you'll avoid shifting income to 2024. If \$12k was the limit for 2022, I wouldn't expect a big difference this year. PS- I wasn't kidding about telling your co-workers to get on the 401k train, especially the two guys who put in zero! In a company with only 12 workers, two zeroes looms large i...
Tue Mar 14, 2023 5:06 pm
Forum: Personal Finance (Not Investing)
Topic: Excess 401(k) deferrals that weren't really...
Replies: 10
Views: 756

### Re: Excess 401(k) deferrals that weren't really...

Does your 401k have a 4% employer match? If not, chances are its not a 'safe harbor 401k' & has failed annual testing required by IRS designed to prevent highly compensated employees (HCE) from contributing too much to the plan vs their non-HCE brethren. Going forward, HCE will have their contributions throttled to non-HCE level plus 2%. I've been throttled at 5% of salary before- 0/10, do not recommend! Ok, I believe the throttling is real, so a follow-up q: How can I know how much I'm permitted to contribute under current conditions? Just keep deferring & accept the refund checks as they come in (which I assume may be only annually)? So far this year, I've set aside \$16841. I tried to reduce my rate on January 30th and am still w...
Tue Mar 14, 2023 4:51 pm
Forum: Personal Finance (Not Investing)
Topic: Inherited IRA fully taxed at transfer?
Replies: 22
Views: 1922

### Re: Inherited IRA fully taxed at transfer?

Thank you all. Still wanting to double check my understanding that the \$77K is taxable. The mom was 89 when 63 old son died, she'll be 91 in April. Do you know if EJ knows this is an inherited IRA? Customs differ between custodians, but my understanding is that most custodians will title an Inherited IRA something close to - “[Original account owner's name], deceased [date of death], IRA FBO (For Benefit Of) [heir's name], Beneficiary” In your OP you wrote- "The money went to Edward Jones into an 'Individual Retirement Account Select'," which doesn't have any of the expected verbiage. Also, do you know if the decedent's Mom has designated her own beneficiary(ies) on her inherited IRA? Whoever that beneficiary is will be locked in...
Tue Mar 14, 2023 2:09 pm
Forum: Personal Investments
Topic: Help me pick between these 2 pension plans
Replies: 41
Views: 2831

### Re: Help me pick between these 2 pension plans

In either case, is a 457 available with strictly employee contributions? Putting a lot in there would likely reduce AGI. Would also be helpful to know the fees & investment options in the 457 plan in order to compare with an brokerage IRA. Here is the fine print on fees that I am finding. Administrative fee of \$30 year. And whatever all this means... Transfers will first be made into a cash sweep vehicle with TD Ameritrade. Then, you can purchase other investments. Also, when moving money back to your Plan’s core investment options, the TD Ameritrade assets will be liquidated and moved to the cash sweep vehicle first, and then moved to the core investment options. Transfers into each Plan’s SDBA will be subject to a minimum amount of \$...
Tue Mar 14, 2023 1:44 pm
Forum: Personal Finance (Not Investing)
Topic: Inherited IRA fully taxed at transfer?
Replies: 22
Views: 1922

### Re: Inherited IRA fully taxed at transfer?

If she moved the money properly (within a 60 day window) from the decedent's 401(k) into an inherited IRA, then you're correct. The rollover would not be taxable and she would only be taxed when she takes distributions. The Empower 1099-R is probably because they don't know what she did with the money. There should be a way in your tax software to indicate that the full amount was rolled over. This should then have the effect or reducing to zero the amount of the distribution that is taxable. If she missed the 60 day window, then there may be circumstances where the IRS would grant a waiver (and treat it as a qualified rollover). See IRS Revenue Procedure 2020-46 for more details. And yes, generally she has 10 years to empty the IRA. I don...
Tue Mar 14, 2023 11:24 am
Forum: Personal Investments
Topic: Help me pick between these 2 pension plans
Replies: 41
Views: 2831

### Re: Help me pick between these 2 pension plans

In either case, is a 457 available with strictly employee contributions? Putting a lot in there would likely reduce AGI. This isn’t clear to me and I would agree could be a game changer. We will look into this more. I think it’s not an option. But let’s say it is. And let’s say we have \$20,000-\$30,000 a year that we can funnel into any retirement account. Is there a reason to use her 457 vs a traditional Roth? I assume we should max out the HSA first, as I do understand that one’s advantage. I guess what I’m saying is, does it even matter if it’s an option if we decide to try to direct our savings towards another pre tax vehicle that would also reduce our AGI? You haven't mentioned whether your salary of \$160k includes an employer plan and...
Tue Mar 14, 2023 11:09 am
Forum: Personal Investments
Topic: Tax-Deferred Savings Disagreement. Who is Right?
Replies: 41
Views: 3865

### Re: Tax-Deferred Savings Disagreement. Who is Right?

Thank you all for the discussion. It seems that @celia and others posit the idea that both my planner and my accountant could be right, for different reasons. i.e.,  do you want lower taxes now, or in retirement? I'd actually like to do both:-). But in all candor, after reading the discussion and advice above, I am inclined to do both ... take advantage of the tax deferral of the SEP-IRA now, as well as contribute to the Roth up to the top of our current tax bracket, this year and in future years.  As @peterfoley said, having money in taxable, tax deferred and Roth gives you broader options (better control of tax rates and IRMAA) when it comes to withdrawals and RMDs. But -- more information was requested -- thank you in advance for recons...
Tue Mar 14, 2023 9:58 am
Forum: Personal Investments
Topic: Help me pick between these 2 pension plans
Replies: 41
Views: 2831

### Re: Help me pick between these 2 pension plans

In either case, is a 457 available with strictly employee contributions? Putting a lot in there would likely reduce AGI. This isn’t clear to me and I would agree could be a game changer. We will look into this more. I think it’s not an option. But let’s say it is. And let’s say we have \$20,000-\$30,000 a year that we can funnel into any retirement account. Is there a reason to use her 457 vs a traditional Roth? I assume we should max out the HSA first, as I do understand that one’s advantage. I guess what I’m saying is, does it even matter if it’s an option if we decide to try to direct our savings towards another pre tax vehicle that would also reduce our AGI? You haven't mentioned whether your salary of \$160k includes an employer plan and...
Mon Mar 13, 2023 10:30 pm
Forum: Personal Investments
Topic: Spouse Need For Roth IRA
Replies: 2
Views: 431

### Re: Spouse Need For Roth IRA

Is there any advantage/need for my wife to have a her own Roth IRA established before I pass? I can't see any! I have a TIRA and old Roth late 1990s IRA. She has a TIRA. We jointly own a taxable investment account with VTSAX. She is primary beneficiary on my TIRA and Roth IRA. I believe she can just inherit my Roth and have it retitled in her name. We are very close in age (mid 80s) so I don't see any age impact worth really considering. Any comments? It's true that your wife can assume your Roth IRA & treat it like her own RIRA, which prevents RMDs during her lifetime. The advantage to opening a Roth IRA in her name is that it would allow Roth conversion of money from her TIRA to avoid future RMDs. This may become significant if one o...
Mon Mar 13, 2023 7:42 pm
Forum: Personal Finance (Not Investing)
Topic: Inherited IRA fully taxed at transfer?
Replies: 22
Views: 1922

### Re: Inherited IRA fully taxed at transfer?

If she moved the money properly (within a 60 day window) from the decedent's 401(k) into an inherited IRA, then you're correct. The rollover would not be taxable and she would only be taxed when she takes distributions. The Empower 1099-R is probably because they don't know what she did with the money. There should be a way in your tax software to indicate that the full amount was rolled over. This should then have the effect or reducing to zero the amount of the distribution that is taxable. If she missed the 60 day window, then there may be circumstances where the IRS would grant a waiver (and treat it as a qualified rollover). See IRS Revenue Procedure 2020-46 for more details. And yes, generally she has 10 years to empty the IRA. I don...
Mon Mar 13, 2023 7:15 pm
Forum: Personal Finance (Not Investing)
Topic: Excess 401(k) deferrals that weren't really...
Replies: 10
Views: 756

### Re: Excess 401(k) deferrals that weren't really...

Does your 401k have a 4% employer match? If not, chances are its not a 'safe harbor 401k' & has failed annual testing required by IRS designed to prevent highly compensated employees (HCE) from contributing too much to the plan vs their non-HCE brethren. Going forward, HCE will have their contributions throttled to non-HCE level plus 2%. I've been throttled at 5% of salary before- 0/10, do not recommend! As noted above, there is no penalty when you are refunded your excess contributions (plus earnings from the contributions), but it does count as taxable income in the year the check is received (2023). Plus, loss of the 401k deduction will affect 2022 taxes, so you will need to file an amended return if you've already filed for 2022. ht...
Mon Mar 13, 2023 3:50 pm
Forum: Personal Investments
Topic: Which spouse’s account to convert?
Replies: 12
Views: 653

### Re: Which spouse’s account to convert?

Due to robust pensions, we have limited ability to do Roth conversions before RMDs begin. (Please take this as a given, I don’t want to get into a discussion of dollar amounts and tax rates.) The younger spouse (by 3 years) has a higher tax-advantaged balance than the older spouse. Of total tax-advantaged, it’s about 55% to 45%. Right now, the younger spouse has 9% of their total balance in Roths. The older spouse has 17% of their total in Roths. I’m undecided whether prioritize the older spouse’s conversions, prioritize the younger spouse’s conversions, or split the conversions between them. Suggestions welcome. I think I would shoot the alligator closest to the canoe & prioritize converting the older spouse's TDAs. By reducing that a...
Mon Mar 13, 2023 2:12 pm
Forum: Personal Investments
Topic: Roth withdrawal question
Replies: 4
Views: 347

### Re: Roth withdrawal question

My friend pulled 50k out of his Roth at 60 yo to buy a new house. If he starts putting money back into his Roth is there any additional holding period for new money? I assume no since he over 60 but I don’t think using a Roth like a bank is what they were intended for. No, based on his age over 59.5, if his withdrawal of the \$50k was 'qualified' by virtue of satisfying the 5-Year Rule since his Roth was first opened, then all subsequent withdrawals are also qualified. Using a Roth like a bank is exactly what Roths (and every other type of account) are intended for! Is it your belief that Roth money should only be spent on buying dentures, cans of Ensure & shoes that fasten with velcro, i.e.- traditional "retirement" expenses?...
Mon Mar 13, 2023 1:51 pm
Forum: Personal Investments
Topic: Roth Contribution after DW retires?
Replies: 3
Views: 91

### Re: Roth IRA limits after marriage

My wife retired in 2021. I thought a non-working spouse could contribute to a Roth even if the MFJ MAGI was >228k? I think you are conflating non-working spouse TIRA deductible contribution rules with Roth IRA contribution rules. Deductible TIRA contributions for a non-working spouse married to a worker covered by an employer plan: 100% below MAGI \$218k and phase out by \$228k, which are higher amounts than available for the working spouse himself (deductibility phase-out MAGI \$116k-136k). Roth contributions are purely based on MAGI, employer plan status is not germane. Phase-out range same as non-working spouse deductions- 100% below MAGI \$218k and phase out by \$228k. Note that both Roth & non-working spouse deductible TIRA are complet...
Mon Mar 13, 2023 1:34 pm
Forum: Personal Investments
Topic: Roth IRA limits after marriage
Replies: 13
Views: 1516

### Re: Roth IRA limits after marriage

Spin off question, if MFJ is set at 228, and we continue to do an earner and a spousal (non earner not retired) roth backdoor, is there any downside to just keeping the backdoor method if income is on the cusp? I won't be able to know what the income will be until bonus are quantified. Normally I would do these in early in the year but this year I am in no rush. The great benefit to the backdoor Roth process is that it works every year, the front door option can easily be closed off by bonuses or unexpected cap gains, etc. appearing late in the year. The backdoor process is a slight PITA, but re-characterization is a much bigger PITA, especially if earnings are involved. If there's any doubt about MAGI level for the tax year, just do the B...
Mon Mar 13, 2023 1:25 pm
Forum: Personal Investments
Topic: Roth Partial Conversion Question
Replies: 31
Views: 1999

### Re: Roth Partial Conversion Question

Call_Me_Op wrote: Mon Mar 13, 2023 11:41 am To my surprise, it turns out I saved all of my form 8606's going back to early 2000's and thus I have all of the non-deductible contributions documented. I did make an error in the cumulative contribution early on and corrected it a few years ago.
I love it when a plan comes together! That's great news. Now you can move ahead with your Roth conversion plans, confident that all your ducks are in a row.
Mon Mar 13, 2023 12:43 pm
Forum: Personal Investments
Topic: Roth IRA limits after marriage
Replies: 13
Views: 1516

### Re: Roth IRA limits after marriage

My W2 this year is 420K, AGI ~460K, and hence I have been using backdoor Roth IRA to get around income limits. My soon-to-be-wife had W2 and AGI around 60K this year, below AGI limits for Roth IRA, and she is investing in Roth IRA the first time this year. (No backdoor needed). We are getting married this year. We will be maxing out our Roth IRAs, and we will be filing taxes jointly (MFJ). In this case, will she need to use backdoor Roth IRA due to combined AGI limits? What is the MFJ income limit for Roth IRA? And does backdoor method work for both partners in MFJ filing as well? I don't want to assume anything, but does the bolded line above imply soon-to-be DW has previously contributed tax-deductible money to a Traditional IRA? With \$6...
Mon Mar 13, 2023 10:52 am
Forum: Personal Investments
Topic: Should I contribute to non-deductible IRA?
Replies: 8
Views: 469

### Re: Should I contribute to non-deductible IRA?

I am currently in a 22% marginal tax bracket and am 62. I used to do back-door Roths, but I recently rolled my pension into a traditional IRA, so that option is now off the table. An advisor (who wants my business) told me I should still contribute to the non-deductible IRA anyway for the tax deferral advantage. I'm struggling to see the advantage in this approach unless I could stay in the 12% bracket once I retire. I'm considering doing Roth conversions once I retire and eventually I'll have to take RMD's. I would appreciate the comments and also what else I need to consider. Thanks. You're 62, how many more years of work are you planning? Your SS FRA is 67, if you retire that year, that's 5 years of IRA contributions x \$7.5k, or \$37.5k ...
Sun Mar 12, 2023 12:34 pm
Forum: Personal Investments
Topic: Roth Partial Conversion Question
Replies: 31
Views: 1999

### Re: Roth Partial Conversion Question

Hi retiredjg, I have been a high earner the whole time (single, no spouse). I am getting close to the end of my career. I am 100% certain that all contributions to the Traditional IRA were not deducted. I am not sure how hard it will be to prove that. If nothing else, Social Security has my salary history documented, which would show ineligibility for tax-deductible contributions. If you have your prior years' Form 1040 going back long enough, it would be simple to reconstruct your post-tax basis & defend yourself against any audit. Ask your CPA, if you have one or you can request the 1040s from the IRS for free. https://www.irs.gov/newsroom/heres-how-people-can-request-a-copy-of-their-previous-tax-return Once you have the history of n...
Sun Mar 12, 2023 10:29 am
Forum: Personal Investments
Topic: Roth Partial Conversion Question
Replies: 31
Views: 1999

### Re: Roth Partial Conversion Question

Hi retiredjg, I have been a high earner the whole time (single, no spouse). I am getting close to the end of my career. I am 100% certain that all contributions to the Traditional IRA were not deducted. I am not sure how hard it will be to prove that. If nothing else, Social Security has my salary history documented, which would show ineligibility for tax-deductible contributions. If you have your prior years' Form 1040 going back long enough, it would be simple to reconstruct your post-tax basis & defend yourself against any audit. Ask your CPA, if you have one or you can request the 1040s from the IRS for free. https://www.irs.gov/newsroom/heres-how-people-can-request-a-copy-of-their-previous-tax-return Once you have the history of n...
Sun Mar 12, 2023 9:57 am
Forum: Personal Investments
Topic: how close to retirement am I?
Replies: 16
Views: 2909

### Re: how close to retirement am I?

I'm finding myself thinking more about moving into semi-retirement possibly in the next few years. I've run a couple of retirement calculators and was surprised to find that retirement may be possible sooner than I thought. I would like your opinions on how soon I could retire or at least semi-retire? Could I retire in 5 years, when our mortgage is paid off (as noted further below)? "Semi-Retirement", by the way, to me means either 1) mostly handing off my solo law practice to a younger attorney, and probably working part time, or 2) cutting back my work hours and just working less (this option seems less workable for a variety of reasons) or 3) the "second career" option - closing my law practice altogether and doing s...
Sat Mar 11, 2023 6:56 pm
Forum: Personal Investments
Topic: how close to retirement am I?
Replies: 16
Views: 2909

### Re: how close to retirement am I?

I'm finding myself thinking more about moving into semi-retirement possibly in the next few years. I've run a couple of retirement calculators and was surprised to find that retirement may be possible sooner than I thought. I would like your opinions on how soon I could retire or at least semi-retire? Could I retire in 5 years, when our mortgage is paid off (as noted further below)? "Semi-Retirement", by the way, to me means either 1) mostly handing off my solo law practice to a younger attorney, and probably working part time, or 2) cutting back my work hours and just working less (this option seems less workable for a variety of reasons) or 3) the "second career" option - closing my law practice altogether and doing s...
Sat Mar 11, 2023 2:55 pm
Forum: Personal Investments
Topic: Cusp of retirement. Questions on withdrawals, Roth conversions, TIPS, SS
Replies: 20
Views: 2601

### Re: Cusp of retirement. Questions on withdrawals, Roth conversions, TIPS, SS

Oh boy, this makes things better! You can withdraw from this instead of from Taxable before age 59.5 for living expenses. We are all discouraging withdrawals from tax-deferred to prevent a 10% early withdrawal penalty. But that doesn’t apply to Inherited IRAs as the original owner is now gone and the IRS thus wants the taxes paid. One thing I forgot to mention is that only 85% of your SS will be taxed. Most states (including Calif) won’t tax it at all. That makes perfect sense now, thank you!! I 'll note we married late in life and have mostly separate property. This is because we would like our separate residual estates to ultimately go to our own sets of relatives after we are both deceased. It is not relevant to our spending strategy wh...
Fri Mar 10, 2023 11:05 pm
Forum: Personal Investments
Topic: Cusp of retirement. Questions on withdrawals, Roth conversions, TIPS, SS
Replies: 20
Views: 2601

### Re: Cusp of retirement. Questions on withdrawals, Roth conversions, TIPS, SS

With your net worth & unique situation, you need to pay a fee-only tax & estate planning expert for guidance. It will be money well-spent. Agree. I will research advisors but off the top off your head do you know one who would be good for me or how I can find one? Unfortunately, I don't have a name to recommend, but a good place to start is the National Association of Personal Financial Advisors- https://www.napfa.org/find-an-advisor# Another resource is the Garrett Planning Network- https://www.garrettplanningnetwork.com/ Both of these group are fee-based, but exactly how the fees are charged varies by adviser, so you'll need to discuss exactly how you'll be charged when you have an initial meeting. Given your complex situation, p...
Fri Mar 10, 2023 7:40 pm
Forum: Personal Investments
Topic: Cusp of retirement. Questions on withdrawals, Roth conversions, TIPS, SS
Replies: 20
Views: 2601

### Re: Cusp of retirement. Questions on withdrawals, Roth conversions, TIPS, SS

We are a married couple. Him:  age 57.  Life expectancy age 70-75. Her:  age 53 normal life expectancy.   Portfolio: Taxable:   \$5 million tIRA/401k:  \$3.7 million Roth:  \$0.6 million Total:  \$9.3 million  Current allocation:  VTI 53 %, VXUS 7 %, BND 40% All BND is in tIRA/401k Income going forward probably in the range of \$100k annually for 2-4 years.     Annual expenses not including taxes \$210k (not much flexibility on this, much of this is medical/insurance related expenses).  We own home outright.  No pensions.  No debt. SS estimate:  him: \$3200 if taken at age 67.  Her:  \$1500 if taken at age 67 Taxes:  Currently 9.3 % state, 24 % federal tax brackets No children or legacy concerns.  Questions: 1)  Is a reasonable withdrawal strategy...
Fri Mar 10, 2023 4:52 pm
Forum: Personal Investments
Topic: Taxable Account Question
Replies: 30
Views: 2344

### Re: Taxable Account Question

Me - 78 years old Wife - 75 years old File Jointly Income: SS - \$32000 Pension and Disability - \$2900 Minimum IRA Dist - \$2700 TOTAL INCOME: \$37690 Lowest Tax Bracket for both Fed and Michigan Let me know whatever else you may need. <snip>. The RMD is from my wife’s IRS. I do not have an IRA. No plan to own tax-exempt bond funds. Your wife's IRA should be considered part of your portfolio as a couple, since you are going to be taxed together if you file taxes Married Filing Jointly. Her IRA RMDs affect your income as a couple. Working backwards from her age-based life expectancy factor (75= 24.6) & the RMD of \$2700, your wife's IRA is about \$65k. That's a substantial part of your portfolio. Out of curiosity, how is your wife's IRA inve...
Fri Mar 10, 2023 4:21 pm
Forum: Personal Investments
Topic: Taxable Account Question
Replies: 30
Views: 2344

### Re: Taxable Account Question

Currently at 78, left with the \$180K that we have been able to save since. If your entire savings is \$180k I would not invest it all. Put some in a high yield savings or high paying money market as an emergency fund. With interest rates currently high, even this money will be making money for you. How you invest the rest depends partially on your tax bracket. If you are in a lower bracket, I don't understand the recommendation for using tax-exempt bonds. Can you tell us something about your income? Are you married filing jointly? Me - 78 years old Wife - 75 years old File Jointly Income: SS - \$32000 Pension and Disability - \$2900 Minimum IRA Dist - \$2700 TOTAL INCOME: \$37690 Lowest Tax Bracket for both Fed and Michigan Let me know whatever...
Fri Mar 10, 2023 2:01 pm
Forum: Personal Investments
Topic: Taxable Account Question
Replies: 30
Views: 2344

### Re: Taxable Account Question

Currently at 78, left with the \$180K that we have been able to save since. If your entire savings is \$180k I would not invest it all. Put some in a high yield savings or high paying money market as an emergency fund. With interest rates currently high, even this money will be making money for you. How you invest the rest depends partially on your tax bracket. If you are in a lower bracket, I don't understand the recommendation for using tax-exempt bonds. Can you tell us something about your income? Are you married filing jointly? Me - 78 years old Wife - 75 years old File Jointly Income: SS - \$32000 Pension and Disability - \$2900 Minimum IRA Dist - \$2700 TOTAL INCOME: \$37690 Lowest Tax Bracket for both Fed and Michigan Let me know whatever...