Search found 953 matches

by ThePrune
Thu Jun 24, 2021 8:17 pm
Forum: Personal Finance (Not Investing)
Topic: Inherited IRA RMD Shocker
Replies: 16
Views: 4440

Re: Inherited IRA RMD Shocker

Hi Kagord, The question of how to correctly calculate the RMD in this situation is actually more complicated that Alan S. has implied. I took the time this evening to skim through my legal textbook that covers all details of Tusts as beneficiaries of IRAs. Specifically, this is Natalie Choate's Life and Death Planning for Retirement Benefits, 8th Edition ( https://ataxplan.com/life-and-death-planning-for-retirement-benefits/ ). The exact terms of the trust as they apply to the IRA, and instructions contained in the trust as to distributions from the IRA can modify the RMD rules. Specifically: (1) If the detailed trust language makes clear that only RMD income may be distributed to the surviving spouse, then the non-recalculating Single Life...
by ThePrune
Thu Apr 09, 2020 9:55 am
Forum: Personal Investments
Topic: RMD and CARES Act
Replies: 12
Views: 5583

Re: RMD and CARES Act

Alan S ., your response to me was very kind, especially since I had completely missed in my reading of CARES that the RMD waiver under sec. 2203 actually treats IRAs somewhat differently than QRPs. I only grasped this detail as I read your response and then more carefully followed through the chain of connections within the existing Internal Revenue Code sections. Here's what I mistakenl y thought: that CARES section 2203(b): ELIGIBLE ROLLOVER DISTRIBUTIONS.—Section 402(c)(4) of the Internal Revenue Code of 1986 is amended by striking ‘‘2009’’ each place it appears in the last sentence and inserting ‘‘2020’’. would indirectly impact both QRP distributions (qualified plans, 403a, 403b and gov't 4457b) as well as IRA distributions. But a mor...
by ThePrune
Wed Apr 08, 2020 4:10 pm
Forum: Personal Investments
Topic: RMD and CARES Act
Replies: 12
Views: 5583

Re: RMD and CARES Act

Alan S . I have the greatest respect for your tax-related knowledge, but I don't believe that your advice in Item (3) below is correct. I'll explain my reasoning in order for you to see if you agree, or if I'm overlooking some detail. You also must not have done another IRA rollover in the last 12 months, since only one distribution can be rolled over in a 12 month period. However, even if you did a prior rollover, there are three possible paths to relief: 1) If the IRS Regs eventually defines ALL distributions done in 2020 as corona virus distributions, then you can roll this back after 60 days and up to 3 years. The rollback is treated as a direct transfer and therefore would avoid the one rollover limit. It will take time before the IRS...
by ThePrune
Wed Apr 08, 2020 5:44 am
Forum: Personal Investments
Topic: Penalty free early annuity withdrawals
Replies: 2
Views: 320

Re: Penalty free early annuity withdrawals

There are several types of "penalties" that might result from a pre-age 59 1/2 withdrawal from a Variable Annuity contract. (1) Surrender charges that are a part of the annuity contract itself. CARES will not eliminate these. (2) Internal Revenue Code Section 72(q) 10% penalty tax for withdrawals from a stand-alone (non-qualified) annuity contract. Sorry, but CARES doesn't eliminate these either. (3) Internal Revenue Code Section 72(t) 10% penalty tax for withdrawals from qualified retirement plans (e.g. 401k plans), as well as other types of savings plans (e.g. 403b, governmental 457b, IRAs) that incorporate this 72(t) penalty by reference. This is the 10% penalty that CARES has eliminated for withdrawals that are coronavirus rel...
by ThePrune
Sat Mar 07, 2020 7:55 pm
Forum: Personal Finance (Not Investing)
Topic: Using daily balance for calculation of SEPP?
Replies: 4
Views: 435

Re: Using daily balance for calculation of SEPP?

Based on the way you are wording your question, I'm not entirely sure you understand how to correctly perform the SEPP calculation. But maybe you do understand after all! Anyway, I'll emphasize the need to carefully study IRS Revenue Ruling 2002-62 (contained on pages 710-713 of IRS Bulletin 2002-42 ) in order to understand the details of the 3 allowed methods for SEPP calculation. This Revenue Ruling contains more comments on selecting an appropriate date for fixing the account balance which is needed for the SEPP calculation. For the Amortization and the Annuitization methods of SEPP calculation, the account balance to be used is chosen at one fixed date (consistent with IRS regulations) and is not needed again for the future years' distr...
by ThePrune
Mon Mar 02, 2020 3:17 am
Forum: Personal Investments
Topic: SIL, 401K Beneficiary
Replies: 7
Views: 761

Re: SIL, 401K Beneficiary

If I read your posting correctly, the 401(k) is approximately $500K. This should definitely be moved into an Inherited IRA, potentially at Vanguard or Fidelity. But please advise SIL that this MUST be accomplished via a direct transfer, where the custodian of the inherited IRA (for example Vanguard or Fidelity) contacts the 401(k) custodian and arranges for the money transfer. Therefore SIL should immediately contact an IRA custodian to begin this process. What do I mean by an Inherited IRA? The new IRA will treat SIL as the beneficiary of the IRA rather than the owner. It will be given a title similar to the following: " Mr. XYZ IRA (deceased 1-1-2020) FBO Mrs. XYZ, beneficiary ." Withdrawals from such an IRA will not be subject ...
by ThePrune
Fri Feb 21, 2020 11:19 am
Forum: Personal Finance (Not Investing)
Topic: deductible health insurance premiums for self-employment?
Replies: 60
Views: 5843

Re: deductible health insurance premiums for self-employment?

JonnyB wrote: Thu Feb 20, 2020 3:27 pmBased on CCA 201228037, it would not be a stretch to say that COBRA, like Medicare, "is insurance that constitutes medical care under Sec. 162(l), it is similar to other health insurance and its premiums can similarly be deducted." And like Medicare, a COBRA policy can be in the name of the spouse.
The red highlighted statement about Medicare is not correct. Medicare coverage is always obtained on an individual basis. No dependents (be it spouse or children) can obtain Medicare coverage just because you are covered by Medicare. So in this sense COBRA is very different from Medicare.
by ThePrune
Fri Feb 21, 2020 3:56 am
Forum: Personal Finance (Not Investing)
Topic: deductible health insurance premiums for self-employment?
Replies: 60
Views: 5843

Re: deductible health insurance premiums for self-employment?

JonnyB wrote: Thu Feb 20, 2020 3:27 pm More important than the exact wording of the law is how the IRS chooses to interpret the law. And this interpretation varies over time even though the law has not changed at all.
Thanks so very much for this enlightening post. This information has also helped to "wash away the rigidity" in my thinking that was so evident in my first, earlier posting in this stream.
by ThePrune
Thu Feb 20, 2020 8:27 am
Forum: Personal Finance (Not Investing)
Topic: deductible health insurance premiums for self-employment?
Replies: 60
Views: 5843

Re: deductible health insurance premiums for self-employment?

As I have already mentioned. The Medicare premium exception, especially for the spouse, dependent and child of the individual, are clearly contrary to the description in Publication 535 . Medicare is most certainly not established, or considered to be established under the business. Medicare enrollment of the spouse, dependent or child are certainly not established by the self-employed individual. Yet they all are eligible for the self-employed health insurance deduction. Maybe I'm missing something here, Spirit Rider . The ability to deduct Medicare premiums as a Self Employed Health Insurance deduction is an enumerated exception that is listed within IRS Publication 535 , on page 21, middle column, towards the bottom. Medicare premiums y...
by ThePrune
Thu Feb 20, 2020 5:02 am
Forum: Personal Finance (Not Investing)
Topic: deductible health insurance premiums for self-employment?
Replies: 60
Views: 5843

Re: deductible health insurance premiums for self-employment?

Which specific paragraphs from pub 535 make you say that this deduction would in no way be approved by the IRS? Is it because the plan is a COBRA plan, or because the plan is in my spouse's name instead of mine? This is a reasonable question to ask. I apologize for being so slow to respond. Since no IRS documents appear to be available that explicitly address the situation (and if there were such, I have every confidence that Spirit Rider would have found them!), then I must fall back on arguing from the (non-authoritative for Tax Court) text of Publication 535, page 21. I've reproduced that text below. The insurance plan must be established, or considered to be established as discussed in the following bullets, under your business . • For...
by ThePrune
Wed Feb 19, 2020 5:59 pm
Forum: Personal Finance (Not Investing)
Topic: deductible health insurance premiums for self-employment?
Replies: 60
Views: 5843

Re: deductible health insurance premiums for self-employment?

It is well established that IRS Publications are not "substantial authority" . This means they provide no exemption from interest & penalties even if follow them faithfully. The reverse is also true. Just because an IRS publication doesn't explicitly allow something doesn't mean it isn't allowed. As you noted IRS Publications and Instructions are usually based on the tax code, IRS rules and regulations. IRS Publication 535 and Form 1040 Instructions on this issue are not based on the tax code, IRS regulations or guidance. Yes, I'm aware of this. But since I couldn't find anything else that even remotely referred to COBRA payments, it's the only IRS material left to fall back on. But there is real value for you to have explici...
by ThePrune
Wed Feb 19, 2020 6:01 am
Forum: Personal Finance (Not Investing)
Topic: deductible health insurance premiums for self-employment?
Replies: 60
Views: 5843

Re: deductible health insurance premiums for self-employment?

What I find disappointing in this posting stream is the lack of an effort to locate, quote and apply Internal Revenue Code (Title 26 USC), Code of Federal Regulations and IRS Publication statements that cover the OP's situation. :oops: IRC Section 162(l) Special rules for health insurance costs of self-employed individuals. 26 CFR Secion 162(l) - 1 Deduction for health insurance costs of self-employed individuals IRS Publication 535 Business Expenses (see Chapter 6, page 21 covering Self Employed health Insurance Deduction) Locating other references (via Google searches) can be much easier and often (but not always) give you the correct answer. But until you take the next step and locate authoritative references from the Code, Regulations, ...
by ThePrune
Sun Feb 09, 2020 7:32 pm
Forum: Personal Finance (Not Investing)
Topic: Fun Side Income in Retirement?
Replies: 50
Views: 4924

Re: Fun Side Income in Retirement?

I was asked to work as an “Instructional Assistant”, getting paid to answer questions from financial advisors about the retirement-related course material they are working through.

Imagine if you could get paid to post answers here on the Forum :moneybag
by ThePrune
Sun Feb 09, 2020 7:23 am
Forum: Personal Investments
Topic: Retirement Planning
Replies: 26
Views: 4213

Re: Retirement Planning

hile a SPIA might be very effective for the life of the individual it could be a horrific investment for those the investor might like to help out with their passing. Additionally, while I can't point out the link at the moment or quote the source it has been authoritatively put forward that SPIA's are most effectively purchased when age 80 has been reached and arrangements have already been made for heirs. There is a bit of a misunderstanding here. Here's how a real retirement income expert, Prof. Wade Pfau, explains the reasoning about when to purchase a SPIA (see book reference in my original posting). It's true that that the percentage-of-principal annual payout gets larger the longer you delay the SPIA purchase. That leads many people...
by ThePrune
Sat Feb 08, 2020 8:35 pm
Forum: Investing - Theory, News & General
Topic: Do any FAs charge a percent of earnings?
Replies: 6
Views: 951

Re: Do any FAs charge a percent of earnings?

Paying for investment advice as a percentage of earnings is prohibited by the Investment Advisers Act of 1940.
by ThePrune
Thu Feb 06, 2020 7:30 pm
Forum: Personal Investments
Topic: Overall defined contribution plan limit 2020 - confusion
Replies: 9
Views: 873

Re: Overall defined contribution plan limit 2020 - confusion

ao1philly,

lakpr gave you an excellent and reliable answer. I only felt the need to state this because sometimes you’ll see responses on this Forum that aren’t entirely correct (to put it politely).
by ThePrune
Thu Feb 06, 2020 3:14 pm
Forum: Personal Finance (Not Investing)
Topic: Trust amendment question/concern
Replies: 4
Views: 734

Re: Trust amendment question/concern

RudyS wrote: Wed Feb 05, 2020 8:55 pm Ask the current trustee why he recommends this. What are the comparative costs? is there any chance of a conflict of interest?
+1
by ThePrune
Thu Feb 06, 2020 3:06 pm
Forum: Personal Finance (Not Investing)
Topic: Surrender Flexible Premium Variable Life Policy?
Replies: 10
Views: 686

Re: Surrender Flexible Premium Variable Life Policy?

Josephine wrote: Wed Feb 05, 2020 2:02 pm I also do not need the money, but I am financially conservative and believe in backups to my backups. The question is what to do with the policy.
Since you already own the policy, one potential usage of the cash value is as a "volatility buffer" for use when your stock investments hit those inevitable bear market downturns. Prof. Wade Pfau, my "boss" at The American College of Financial Services, has published a number of articles on this topic. One of these is, Integrating Whole Life Insurance into a Retirement Income Plan (Pfau & Finke 2017). This would be an excellent possibility for you to consider, since you are so financially conservative!
by ThePrune
Thu Feb 06, 2020 1:35 pm
Forum: Personal Finance (Not Investing)
Topic: long term care insurance versus self-insuring
Replies: 110
Views: 9270

Re: long term care insurance versus self-insuring

Rather than a "Yes / No" answer, you'll benefit more from a description of how to think through the decision. The starting point for the self-funding (don't call this self-insuring!) decision: how many years of the most expensive care (e.g. Nursing Home) do you want to set aside funds to cover. A very conservative answer might be 5 years for each spouse. For higher income individuals (you definitely fit!), there is estimated to be only a 3.5% chance of requiring more than 5 years of Nursing Home care. (Send me a Private Message with email if you'd like even more detailed LTC statistics). Perhaps more realistic is self-funding for 3 years of Nursing Home care. Regardless, estimate the current cost for the amount of LTC you'd want t...
by ThePrune
Thu Feb 06, 2020 11:55 am
Forum: Personal Finance (Not Investing)
Topic: Rule 72T: Just how does this work? Anyone do this?
Replies: 49
Views: 7909

Re: Rule 72T: Just how does this work? Anyone do this?

If OP or anyone else is interested:

I created a document that goes through all the details of IRS Revenue Ruling 2002-62 and the various allowed approaches to SEPPs. It adds in all the details required to understand the examples that the IRS has posted on the FAQ website. This document was created to train Financial Advisors who were taking the Retirement Income Certified Professional (RICP) coursework offered through The American College of Financial Services.

Send my a Private Message (including your email address) if you'd like a PDF copy.
by ThePrune
Thu Feb 06, 2020 9:40 am
Forum: Personal Investments
Topic: ? about requirement - inherited roth IRA
Replies: 3
Views: 589

Re: ? about requirement - inherited roth IRA

Your question is interesting because of the combination of a Trust and inherited Roth IRAs. I'll leave the potential complications resulting from the Trust until the end. It's a common practice for a brokerage to create multiple inherited IRAs for the beneficiaries and to divide the original IRA funds between those. For IRA owners who died before Jan. 1, 2020 there is a definite reason for this! Under the RMD rules for inherited IRAs (and this also applies to Roth IRAs), the life expectancy for the oldest person on an inherited account would control the distribution rate. This could be disadvantageous for the younger heirs. By having each beneficiary own their own inherited IRA, it offered the possibility for a maximum "stretching out&...
by ThePrune
Wed Feb 05, 2020 8:39 pm
Forum: Personal Investments
Topic: Retirement Planning
Replies: 26
Views: 4213

Re: Retirement Planning

Hooked, What you are proposing might work, but could well be very inefficient. Or it might fail miserably! Frankly, you haven't supplied enough information for a knowledgeable planner to give a valid evaluation. My perspective as someone who is working on a Masters degree in financial planning for retirement (MSFS-R) naturally leads me to see the complexities that others tend to miss. Simplicity is a virtue only for those things that are amenable to a simple analysis. A saying from The Proverbs comes to mind, " The prudent see danger and take refuge; the simple keep going and pay the penalty ." Here are examples of planning considerations that comes to mind which aren't mentioned in your posting. I'm assuming you have decided on a...
by ThePrune
Tue Jan 28, 2020 6:40 am
Forum: Personal Investments
Topic: Deferred Annuity
Replies: 3
Views: 448

Re: Deferred Annuity

Supplying a little more information might enable others to give sound advice. Here's what I think you should post: (1) You stated that one of the deferred annuities was nonqualified. That means it is not owned within an IRA (or similar tax-deferred plan). But what about the other 2 annuities? Are they owned within an IRA or are they also nonqualified? (2) You stated that you want advice about taxes and the potential of liquidating some of the annuities for a transfer to Vanguard. Before anyone could comment on these points, you will need to post the current cash value dollar amounts for these annuities. (3) Although a 1.6% annual return is modest, it's really no worse than what you'll be receiving in a very conservative Vanguard money marke...
by ThePrune
Sat Jan 25, 2020 9:12 pm
Forum: Personal Finance (Not Investing)
Topic: Is it possible to contest beneficiary of a life insurance and brokerage account of a deceased?
Replies: 51
Views: 5702

Re: Is it possible to contest beneficiary of a life insurance and brokerage account of a deceased?

GuyInFL wrote: Sat Jan 25, 2020 9:05 pm Looks like you can't disinherit your spouse in Massachusetts.
The spouse's Right of Election applies to property that passes through Probate. Life Insurance proceeds and IRAs do not pass through probate.
by ThePrune
Sat Jan 25, 2020 9:07 pm
Forum: Personal Finance (Not Investing)
Topic: Is it possible to contest beneficiary of a life insurance and brokerage account of a deceased?
Replies: 51
Views: 5702

Re: Is it possible to contest beneficiary of a life insurance and brokerage account of a deceased?

She should see a lawyer just in case MA has some court precedents that might help her.

But generally in common law states, there would be no basis to challenge either the life insurance or the IRA beneficiary designations.

Life insurance policies with an ex-spouse listed as the beneficiary can often be successfully challenged if the policy owner had remarried. That's a useful fact to be aware of. But it will not be of any help in this situation.
by ThePrune
Sat Jan 25, 2020 8:55 pm
Forum: Personal Investments
Topic: Mega Back Door ROTH conversion
Replies: 13
Views: 1745

Re: Mega Back Door ROTH conversion

a) If i keep the earning in tiRA and since i've maxed out rIRA through backdoor conversion, wouldn't this violate IRS rule that your total contributions to all of your traditional and Roth IRAs cannot be more than $6000.00 Silk McCue gave you the correct answer earlier. I just wanted to add a comment because of the confusing terminology that the IRS uses in it's Publication 590-B for these types of funds. If you go to page 31 of the linked publication, under the major heading titled, " Ordering Rules for Distributions ", you'll see these sorts of converted dollars referred to as 2. Conversion and rollover contributions . The use of that word "contributions" might be causing you (and others!) problems. But in terms of ta...
by ThePrune
Sat Jan 25, 2020 7:46 pm
Forum: Personal Finance (Not Investing)
Topic: Pension beneficiary
Replies: 14
Views: 1668

Re: Pension beneficiary

akron1977 wrote: Sat Jan 25, 2020 6:38 pm so with my spouse's blessing I have named our daughter (not a huge pension amount, obviously). How common is this? When my husband retired, I don't recall any option that allowed a non-spouse pension beneficiary.
Just wanted to make sure about one point.

Did you have your spouse sign a Waiver of Spousal Rights Form in the presence of a notary? Without such paperwork, PBGC will not legally be able to recognize any other person besides your spouse as a survivor beneficiary. This is a federal law requirement (ERISA 1974, Retirement Equity Act 1984).
by ThePrune
Sat Jan 25, 2020 7:32 pm
Forum: Personal Investments
Topic: What to do with a variable annuity
Replies: 11
Views: 983

Re: What to do with a variable annuity

Cait , one option that many people overlook when it comes to Variable Annuities (VAs) is the "Fixed interest" investment option. Although different VA sellers use different names, there will be an investment option available within your VA that supplies a fixed rate of interest. This isn't a mutual fund option, but instead is a direct investment into the insurance companies General Account. Money moved to this "fixed interest" option will not be subject to an annual expense ratio fee, because it isn't a mutual fund. Also, money invested into this option doesn't pay any Mortality and Expense fee. The fixed annual fee of $30 you referred to will probably remain in place. If you move all your VA mone y into this "fixe...
by ThePrune
Fri Jan 24, 2020 7:41 pm
Forum: Personal Investments
Topic: SEP IRA - Advice on Providers & Investing?
Replies: 10
Views: 877

Re: SEP IRA - Advice on Providers & Investing?

27KaFv wrote: Fri Jan 24, 2020 2:56 pm Hi all! I'm the sole proprietor of a business, planning to open a SEP IRA and contribute the max (which for me should be ~35k) and have a couple questions about how to proceed:
Just to be clear, you're expecting to have $175,000 of net self-employment income, correct?

A self-employed individual is only allowed to contribute, as their own employer, 20% of net self-employment income. 20% x $175,000 = $35,000 employer contribution.
by ThePrune
Wed Jan 22, 2020 12:24 pm
Forum: Personal Investments
Topic: Cap gain calculation selling O/O home now a rental
Replies: 1
Views: 245

Re: Cap gain calculation selling O/O home now a rental

Please !!!!! always refer to IRS publications and posted materials when seeking to understand tax implications of your economic actions.

Here is a link to IRS Tax Topic No. 701 on Sale of Your Home. It supplies the general rules for capital gains exclusion for residence property.

Included within this Tax Topic is a link to IRS Publication 523, which has a very thorough review of all associated rules.
by ThePrune
Mon Jan 20, 2020 7:05 pm
Forum: Personal Finance (Not Investing)
Topic: solo 401k eligibility?
Replies: 8
Views: 765

Re: solo 401k eligibility?

Kelly, A Solo 401(k) is legally classified as a "Qualified Retirement Plan". This type of plan is governed by the Internal Revenue Code section 401(a) and all associated regulations. One of the legal requirements for all "qualified" plans is PERMANENCE. Here is how my master's degree course textbook describes the permanence requirement: A plan must be a permanent arrangement to be qualified, not just a short-term tax deferral or compensation arrangement. The permanence requirement provides that an employer's intention when establishing a plan must be that the plan is a permanent program. ..... Without such reasons, the IRS may assert there never was any plan, and the plan will be retroactively disqualified. If someone we...
by ThePrune
Sun Jan 19, 2020 8:19 pm
Forum: Personal Finance (Not Investing)
Topic: Deduct independent contractor mileage?
Replies: 36
Views: 2664

Re: Deduct independent contractor mileage?

Question 2) I know the mileage to my w2 job isn’t deductible but when my w2 job ends and I go directly to my independent contractor job, is that mileage deductible? No. Your W2 job is not one of your business locations, so driving from your regular job to your first business location is commuting, the same as if you were driving to a second W2 job. Driving from your contractor job back to your home is also commuting since your home is not a business location. I think that what JonnyB posted here doesn't agree with what the IRS has in Publication 463 (2018 edition) for Travel, Gift and Car Expenses : Two places of work . If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from on...
by ThePrune
Sun Jan 19, 2020 8:03 pm
Forum: Personal Finance (Not Investing)
Topic: HSA Reimbursement for Expenses Deducted only on State Return?
Replies: 5
Views: 567

Re: HSA Reimbursement for Expenses Deducted only on State Return?

FrugalInvestor, I'd rather rephrase your question: Are you allowed to claim a state medical expense deduction for expenses that you previously covered through an H.S.A. distribution? After all, federal law alone controls whether an H.S.A. distribution is qualified or nonqualified when used to cover the costs of medical expenses. If you agree that my rephrasing of your question still fits your situation, then it deals more specifically with your particular state's law covering when medical expenses are eligible to be deducted for state tax purposes. A good place to start is to see what your state's policy is for deducting medical expenses that were previously reimbursed from medical insurance plans. I suspect that your state doesn't allow th...
by ThePrune
Sat Jan 18, 2020 8:36 pm
Forum: Personal Investments
Topic: Opinions on Brighthouse Shield Annuity?
Replies: 11
Views: 4990

Re: Opinions on Brighthouse Shield Annuity?

A financial advisor is trying to sell us a product called " Brighthouse Shield Level Select 6-Year Annuity " as a medium-term place to park our money -- so, lower risk, some chance of returns based on the stock market. In general annuities stand the best chance of being a reasonable alternative when they are used as a long-term investment . If someone is really looking to park their money and insisted on using an annuity, the only sane option would be a Multi Year Guaranteed Annuity (MYGA). These provide a guaranteed annual compounded return for a fixed number of years. 5 year MYGAs tend to be the sweet spot and can currently give interest rates of between 3.0 and 3.5%. But insurance agents (even when they are hiding behind the m...
by ThePrune
Thu Jan 09, 2020 5:09 am
Forum: Personal Finance (Not Investing)
Topic: 457(b) wiki. I believe some correction is needed.
Replies: 16
Views: 2065

Re: 457(b) wiki. I believe some correction is needed.

Spouse now works for hospital owned by the city - not for profit. I believe it is set up as governmental but I need to confirm. (its a weird setup). The conflicting info was in the first batch of glossy marketing info given to her by the Voya Rep ( :| ) that had info talking about ability to make withdrawals prior to retirement yet the following section had information talking about hardship withdrawals. I couldn't decipher which was permitted until this thread showed up in my search. If Voya is involved, then that means this is 100% Certain a governmental 457(b) plan. After all, non-governmental 457(b) plans are not allowed to set aside the deferred compensation in trust, but IRC Section 457(b)(6) shall remain (until made available to the...
by ThePrune
Thu Jan 09, 2020 5:03 am
Forum: Personal Finance (Not Investing)
Topic: 457(b) wiki. I believe some correction is needed.
Replies: 16
Views: 2065

Re: 457(b) wiki. I believe some correction is needed.

I was asked to take a look at the discussion (so far) in this posting stream about the 457(b) Wiki. The first question that comes to mind is, Exactly how much detail do we really want to delve into in a mere Wiki article? Fundamentally, if anyone reall y wants to understand these things, they need to read through IRC Section 457 as well as the related Treasury Regulations 1.457-1 through 1.457-10 (I won't provide all the links here; simply Google the regs and make use of the readable formatting at the links to the Legal Information Institute website). Perhaps we need to add a final section to this (and other Wiki articles) that contains the links to the Code and Regulations for those intrepid souls who really are interested in such details?...
by ThePrune
Thu Jan 02, 2020 1:18 pm
Forum: Personal Finance (Not Investing)
Topic: Trust taxation question
Replies: 15
Views: 2098

Re: Trust taxation question

Since this posting stream is dealing with trust taxation, I thought I'd add another comment. My previous post (above) supplied information from my MSFS course textbook dealing with taxation of distributions from the general type of complex trust. But as I work my way through the textbook (which is aimed at law students), I'm discovering that different types of trusts can have different taxation rules. The taxation of distributions from Charitable Remainder Trusts (a type of split-interest trust) is different from what I described before. Income retained by these trusts is non-taxable, unlike the general type of trust. So there is no need to use the mechanism of Distributable Net Income (DNI) to decide how to allocate the income tax due betw...
by ThePrune
Sun Dec 29, 2019 8:50 pm
Forum: Personal Finance (Not Investing)
Topic: Trust taxation question
Replies: 15
Views: 2098

Re: Trust taxation question

I guess the heart of the question is, does the income come out of the trust in the way I am hoping (ordinary income, then qualified dividends, then capital gains) or is it pro-rated in some weird way. The estate planning textbook I'm using for my current MSFS class (Kathryn Henkel's Estate Planning and Wealth Preservation ) covers income taxation of Trusts in Chapter 6. The answer to your question is generally (but not always) as follows: (1) The first thing that must be determined is the Distributable Net income (DNI), which is defined by a series of complicated tax statutes, mostly in IRC section 643 . (2) In general (but not always), DNI will consist of ordinary income and dividends of all types. Long term Capital gains are generally no...
by ThePrune
Mon Dec 02, 2019 11:30 am
Forum: Personal Finance (Not Investing)
Topic: taxes related to annuity account
Replies: 7
Views: 803

Re: taxes related to annuity account

However, does my annuity account have any impact on the Roth IRA conversion due to the pro-rata rule? For example, I have $70,000 in the annuity account. In 2019, I made $20,000 after-tax contribution and earned $1500 before converting to Roth IRA. How much money is taxable if I convert all $21,500 to Roth IRA? Is it just $1500, not considering the annuity account or $1500 + $20,000x(7/9)? Also, if I keep the annuity account, how does it impact each year in the future? Any IRA accounts you have, such as the IRA annuity, have no impact on the Roth conversion from a qualified employer retirement plan, such as your 401(k). IRA's are aggregated with IRAs onl y for pro-rata / tax purposes. Keep in mind that an "IRA" includes SARSEP, S...
by ThePrune
Wed Nov 06, 2019 7:46 pm
Forum: Personal Investments
Topic: In-Plan 401k After-Tax to Roth conversion with backdoor Roth
Replies: 11
Views: 1012

Re: In-Plan 401k After-Tax to Roth conversion with backdoor Roth

HomeStretch wrote: Wed Nov 06, 2019 7:25 pmSome 401k plans don’t allow partial distributions so I wondered if this precluded a former participant from being able to only rollover the after-tax portion.
What you are alluding to is correct. The 401(k) plan is not obligated to offer every type of distribution that is allowed by statute, Treasury regulation or IRS Notice. The 401(k) plan document must always be examined to determine what is allowed / not allowed.
by ThePrune
Wed Nov 06, 2019 7:12 pm
Forum: Personal Investments
Topic: In-Plan 401k After-Tax to Roth conversion with backdoor Roth
Replies: 11
Views: 1012

Re: In-Plan 401k After-Tax to Roth conversion with backdoor Roth

The IRS has provided official guidance in Notice 2014-54 on how to divide a roll-over distributions containing both pre-tax and after-tax amounts among several receiving accounts: If the pretax amount with respect to the aggregated disbursements that are treated as a single distribution is less than the amount of the distribution that is directly rolled over to one or more eligible retirement plans, the entire pretax amount is assigned to the amount of the distribution that is directly rolled over. In such a case, if the direct rollover is to two or more plans, then the recipient can select how the pretax amount is allocated among these plans . To make this selection, the recipient must inform the plan administrator of the allocation prior ...
by ThePrune
Tue Nov 05, 2019 2:22 pm
Forum: Personal Finance (Not Investing)
Topic: Tax Projections in Retirement?
Replies: 12
Views: 1816

Re: Tax Projections in Retirement?

FiveK wrote: Tue Nov 05, 2019 1:12 pm
ThePrune wrote: Tue Nov 05, 2019 8:44 am If you want more reliable tax projection numbers, I suggest trying the free I-orp program and the modestly priced MaxiFi Planner program.
Don't know about MaxiFi, but i-orp makes incorrect assumptions for lower incomes (e.g., assuming 85% of any SS benefit is taxed) and higher incomes (e.g., ignoring NIIT). Might be OK for a "Goldilocks" income - not too high, not too low....
Thanks for this very useful warning about the tax calculation limitations of i-orp.
by ThePrune
Tue Nov 05, 2019 8:44 am
Forum: Personal Finance (Not Investing)
Topic: Tax Projections in Retirement?
Replies: 12
Views: 1816

Re: Tax Projections in Retirement?

Wondering what causes these tools to be so different? And I guess more importantly, how to get "Good" tax projection numbers? I taught an adult education class last winter where I ran a hypothetical family's retirement finances through a number of free, online programs. There were certainly differences in their results (including for taxes), but for the most part they were reasonably close. Your observation about extreme differences is very instructive. One thing I taught my students to do was to "audit" the tabulated, detailed year-by-year calculational results from each of the programs. In every case we found errors in the math , usually small but sometimes not so small. It is "conventional wisdom" that all ...
by ThePrune
Tue Nov 05, 2019 8:19 am
Forum: Personal Investments
Topic: Roth Conversion of an individual TIPS bond
Replies: 9
Views: 757

Re: Roth Conversion of an individual TIPS bond

vtMaps , Short answe r: If you are more concerned about possible future deflation rather than high future inflation, it's probably best to leave the TIPS in your traditional (non-ROTH) account. My reasoning : I've also had to wrestle with the question of where to locate my TIPS bond ladder. If inflation remains modest, I anticipate the TIPS will have a lower return that my equity mutual funds. In that case it's better (as ivk5 said) to retain your Roth account for the higher returning equities. But one reason to own TIPS is as "insurance" against potentially very high future inflation. An example, for 1975 through 1981 the CPI-U rose by 81%. Ouch! In this situation I'd like to retain as much of the TIPS "insurance payout&quo...
by ThePrune
Mon Nov 04, 2019 3:49 pm
Forum: Investing - Theory, News & General
Topic: Preparing for Your Best Retirement course
Replies: 14
Views: 3004

Re: Preparing for Your Best Retirement course

More info please ... When and how much? I welcome more and new info and believe I can decide for myself. I recently purchased an SPIA and am considering getting more. Here is a link to the course information: Preparing for Your Best Retirement . The cost is $795. From my perspective one of the drawbacks is that the course is presented "live" during the middle of the day. There is the capability to watch the recorded version at your convenience. There will also be "Office Hours" associated with the course where you can chat with the course faculty about topics related to the course (or anything "finance-related"). I help Wade conduct Office Hours for the RICP designation program, and can assure you that these a...
by ThePrune
Mon Nov 04, 2019 11:12 am
Forum: Personal Investments
Topic: Social Security Windfall Elimination Provision (WEP) question
Replies: 17
Views: 2687

Re: Social Security Windfall Elimination Provision (WEP) question

Yes, the school district and state also contribute to the pension plan but those contributions beef up the plan itself and are not something I'm entitled to withdraw. So it seems pretty cut and dried, if I cash out now then I escape the WEP . It isn't considered a lump sum pension payout. It's simply a withdrawal of my own contributions. As long as your withdrawal of your own contributions forever terminates your right to a future pension based on the Employer contributions, then what you are suggesting looks like it will work. If you can't terminate the future Texas pension, then (as I read the POMS rules) WEP applies to ALL funds withdrawn, whether just your own or combined with Texas contributions. I'm not sure what the SSA would think ...
by ThePrune
Mon Nov 04, 2019 10:38 am
Forum: Investing - Theory, News & General
Topic: Preparing for Your Best Retirement course
Replies: 14
Views: 3004

Re: Preparing for Your Best Retirement course

Wade Pfau has recently gotten into the business of hawking annuities, so I would steer clear of that organization. Given the antipathy towards annuities displayed by some here at the Bogleheads, I suppose that the mere fact that Wade Pfau recommends people consider annuities in some situations makes him a "hawker of annuities". But this characterization is very unfair. In Wade's latest book, Safety-First Retirement Planning , he prefaces each chapter on annuities with the following statement: One should tread carefully. Due diligence and a comparison with other annuity options is needed to make sure that the product is fairly priced and will behave in the way that the purchaser understands it to behave. I do not want the "ba...
by ThePrune
Mon Nov 04, 2019 9:25 am
Forum: Personal Investments
Topic: Social Security Windfall Elimination Provision (WEP) question
Replies: 17
Views: 2687

Re: Social Security Windfall Elimination Provision (WEP) question

texasdiver, Flobes pointed you in THE correct direction for resolving all your WEP questions: The Program Operations Manual System (POMS). Her link takes you to the detailed rules that the SSA personnel will use to resolve your situation. From what you've written, your Texas pension has both employer contributions as well as your own, employee, contributions. If this is correct, here is the general rule from RS 00605.364 Determining Pension Applicability, Eligibility Date, and Monthly Amount : A.1.a. If employer contributions or employer and employee contributions are used to determine the payment, it is generally a pension subject to the windfall elimination provision (WEP). If you can withdraw your own, employee, contributions and forfeit...
by ThePrune
Wed Oct 09, 2019 2:03 pm
Forum: Personal Finance (Not Investing)
Topic: Tax Savings ideas - retired with large separation payment
Replies: 9
Views: 1229

Re: Tax Savings ideas - retired with large separation payment

The best way to "think this through" is to march through the lines of your latest Form 1040 and pay attention to every entry that might reduce your AGI and/or Taxable Income. One idea that comes to mind lies within your itemized deductions. Do you generally make charitable contributions each year? If so, could you bunch together several future years of charitable giving and make the gift this year? If so, will it make your Itemized Deduction more advantageous that your Standard Deduction? If increasing your Itemized Deductions appears to be a beneficial strategy, then look at all such components. If you aren't already hitting the $10,000 limit on SALT (State and Local Taxes) deductions, then see if you can maximize this by: (1) Ma...
by ThePrune
Tue Oct 08, 2019 12:06 pm
Forum: Personal Finance (Not Investing)
Topic: [Should I be taking RMDs from an Inherited 457?]
Replies: 11
Views: 870

Re: [Should I be taking RMDs from an Inherited 457?]

There have been several confusing (confused!) statements made in this posting stream about RMDs as they apply to inherited 457 accounts. I'd like to cite the relevant Treasury regulations on this topic, so that all readers will unambiguously know the facts. 457 plans are governed (not surprisingly) by section 457 of the Internal Revenue Code (IRC). In IRC section 457(d)(2) it is specified that required distributions for such accounts are governed by IRC section 401(a)(9) and associated Department of Treasury Regulations. This is the section of the IRC that applies to profit sharing plans, stock plans and CODA plans (such as 401k's). Trying to guess at the RMD rules that apply to 457 plans by examining rules that apply IRA's (section 408 of ...