Bogleheads.org

Thank you for placing everything as a total picture! I could not see it! Glad you found that helpful. :happy Yes, I’m reluctant to do lots of bonds. I’m working on it! This is the most important thing you can do for your portfolio, so please do think about it long and hard before avoiding adding on a chunk of bonds. Unless you can think of some other way to preserve what you have. At your current stock to bond ratio, a serious stock market event like 2007 - 2009 would reduce your portfolio from the current $572k to something like $340k. You may be reluctant to do lots of bonds, but how anxious are you to see your portfolio fall to $340k and stay there a year or so? That might actually mean you could not retire when you want. That is the ki...

My thought is there may not be any losses to harvest next year if you wait.

But I see your point. And agree that harvesting losses makes it harder to harvest losses in the future.

Agree with above - this is specific to your plan and is likely correct (unless the rep is not reading your plan correctly).

PizzaEater wrote: ↑Thu Mar 30, 2023 8:05 am Also to add: if you already have gains this year, you do NOT want to try to harvest losses. Wait until next year to try to harvest losses (for the purpose of using those losses to offset income).

I don't understand why harvesting losses, if there are any, would be a problem.

Yes. But I would not generate the capital gain at all unless you really need to get rid of something in taxable. Your losses are more beneficial used against ordinary income than against capital gains.

Kelly, I'm going to re-post your portfolio showing how much each of your holdings represents. It makes things easier to understand. Me-57 DW-65 We file jointly. Fed tax rate 12% Missouri tax rate- We have a emergency fund. Debt: no debt but the house. We owe $34K at 4.5% Desired allocation <---and 80/20 portfolio is too aggressive for people approaching retirement; you need to start thinking about preserving what you have saved. Moving money out of stocks is the only way to do that 60% US index 20% international index 20% total intermediate bond Brokerage-Joint 64,763. 11.3% 6.7% Walmart stock- $38280 0.9% KO- $4920 0.8% OGE-$4545 1.4% FSKAX Fidelity Total Stock Index - 8214.28 (.015) 1.5% Spaxx Fidelity money market 8804.42 (.42) Her 401k ...

Are you asking about taking long term capital gains that will be taxed at 0% because of your income level?

If yes, my understanding is that your banked losses will be applied against the gains...even though that does not benefit you at all. You just lose/waste the losses. If you still have losses stored up after that, you can apply $3k of losses against ordinary income.

I've not experienced this myself, just read it here several times over the years.

Question 1: I assume that one option is that I move everything from her Traditional-IRA into her employer-sponsored plan and then carefully keep track of the "after-tax basis" of the employer sponsored plan. I assume that when funds are finally taken out of her employer-sponsored account the after-tax dollars would not be taxed again. Is it right? (Incidentally, I am afraid of this approach. Surely I will forget the cost basis and end up paying tax on the after-tax dollars twice.) No, no, 1000 times no! :shock: Question 2: Is there a magical way that I can move just the right fraction of her Traditional IRA into the employer sponsored plan, leaving "only the after-tax dollars" in the Traditional IRA so that these can be...

Rather than put money into tIRa in 2023and hope it is deductible, you can wait until you are near done with your taxes in early 2024 and figure out exactly how much is deductible and make the contribution then. It's a pain but might be easier than trying to fix something later.

Getting married is starting to look easier...

Mr Buddy wrote: ↑Wed Mar 29, 2023 2:22 pm 2) Switch from ROTH to traditional IRA contributions for the remaining 4000 that I can contribute this year.

You'll need to be careful with this. If your AGI goes over $73,000, you cannot do a full deduction.

Your contributions to 457 will reduce your AGI, but the overtime might cause it to go over. Might need some careful attention.

Or this one.

https://ttlc.intuit.com/community/retir ... 00/1868847

The re-characterization meant that you made a non-deductible contribution to tIRA for 2022. This needs to be captured on the 2022 Form 8606. It should be just lines 1,3, and 14. And enter a comment about the re-characterizatiion.

Since there was no conversion in 2022, no conversion is reported.

I think this thread should help you figure out how to do that. viewtopic.php?p=7132064#p7132064

I see what you mean. I looked at mine and found the same thing. Don't know why it says that but "tax speak" sometimes does not mean what it seems to mean.

If you are single, you will owe tax on it unless you can find ways to offset some income. If you are married and $56k-ish is your total other income, a lot of these LTCG will fall into the 0% tax rate bracket.

Naris wrote: ↑Tue Mar 28, 2023 11:53 am Mystery solved.

Good!

Looks like it is doing one person's conversion right and one wrong. I can't think of any other reason that only part of the $12k is being shown as taxable. Look again to be sure that each person's 8606 is correct?

But it is a little odd that it is not $6k instead of the odd number.

detroitbabu wrote: ↑Tue Mar 28, 2023 5:43 am As a last resort, I am planning to back out my backdoor contributions. If I do that, does the money go back to traditional IRA account or my sweep account, does anyone know?

You cannot "back out" of your backdoor contributions. A Roth conversion cannot be re-characterized.

retiredjg, you said: "And she will have basis in her tIRA until all her tIRA is gone...unless you go to the trouble to "separate the cream from the coffee" by rolling the pre-tax portion of her tIRA into a 401k or similar plan." This might be complicated to figure out as it was originally funded through a 403b and rolled over from the businesses plan administrator to vanguard over a decade ago. So everything was consolidated, no ability to see lots. Would I be forced to roll the entirety of the $85,000 in the tIRA into a Roth? We are in the 35% tax bracket for 2022, 32% for 2021. Thank you everyone. Can't believe I goofed up. Glad I caught it (if not as soon as I would have liked) This is WAY easier than you are imagini...

When we had the meeting with the tax guy, he didn't give me great confidence that he knew the process very well. This is not unusual. We hear this a lot. I spent a lot of time researching the subject here and on Youtube. I returned the following day with completed form 8606 for both of us. Since we didn't complete the conversions in the 2022 tax year, it is my understanding that we both should have $6,000 in lines 1, 3 & 14 and 0 on line 2 on the 8606 form. Is this correct? Yes. He is asking the balance of any traditional, SEP, and SIMPLE IRAs as of 12/31/2022. Does that even matter for 2022 taxes? My interpretation is that a balance in traditional, SEP, and SIMPLE IRAs only matters in the tax year you made the conversion, which in our...

Naris wrote: ↑Mon Mar 27, 2023 8:28 pm TaxAct has a separate question for nondeductible IRA contributions in the preceding tax year, whereas TurboTax only asks for previous years.

I suspect the problem is here.

TurboTax definitely has a way to enter this information unless it is something wrong with the online version. Can you look at the Form 8606 in the online version? If yes, what is on line 2?

What do you mean "TT only asks for previous years"? How is that different from asking about the preceding tax year? What the software wants you to enter is any basis carried over from all previous years. Whether the non-deductible contribution was from last year or 10 years ago is not relevant.

Have you seen this? Updated each year.

https://thefinancebuff.com/how-to-repor ... botax.html

Doing great. Keep it up!

Filing just the corrected 8606s will not take care of the problem. You need a new 8606 and a 1040x - for both years.

And she will have basis in her tIRA until all her tIRA is gone...unless you go to the trouble to "separate the cream from the coffee" by rolling the pre-tax portion of her tIRA into a 401k or similar plan.

Assuming you did the backdoor process for each of you and you are married filing jointly.... The 2021 taxes need to be amended. Spouse's 8606 will change when you enter the value of spouse's IRA at the end of 2021 to Form 8606. There will be a taxable amount on spouse's 8606 which will carry over to line 4b on the 1040x. You will need to pay the tax and a penalty. Pro-rating spouse's backdoor will leave some basis on line 14 of the 2021 Form 8606. When you do the 2022 taxes, carry that line 14 forward to line 2 on spouse's 8606 for 2022. You cannot do your 2022 taxes until the Forms 8606 are correct from 2021. If you have not done your 2022 taxes yet, wait until you have the 8606 from 2021 done. File an extension if necessary. If you alread...

Mike Piper has a way of making things simple and understandable. This is yet another good example.

exodusNH wrote: ↑Mon Mar 27, 2023 10:36 am It's more likely the small company's HR department doesn't know better.

Or there is something else in play? For example, could the account cost the employer some money and they don't want to pay it any more.

Does "top heavy" apply after one leaves employment?

It will be interesting to see what the advisor suggests.

1. I have an employer sponsored 401k. I'm in high tax bracket so I don't know what's best for me Roth or Traditional 401k? From my research, I'm getting conflicting information on this. I'm looking from advice from someone's personal experience. With no other information, the answer to this is essentially always "traditional" because of your high tax bracket. Paying taxes later (usually in retirement) at a lower tax rate means you keep more money in the long run. 2. I started with Roth 401k at work, but switched to traditional a couple of months after opening it thinking it would be best to get a tax deduction now. Are there any tax implications on switching mid year? No. 3. I have an IRA but I'm not eligible for Roth IRA because...

A recently retired buddy of mine just got a notification from his former employer that he should roll over his 401K (currently held by Fidelity) into an IRA or move it to a 401K plan at his new employer. His balance is in the low seven figures. Is this move a requirement? I'm asking because I have also recently retired and wasn't planning to touch my 401K money yet, possibly not until RMDs kick in at 73. I thought retired employees had the option to keep their funds at a former plan, but thought I would check with the Bogleheads community. Unless the plan is being terminated they can't force out a balance that large but a review of fees and such might be worthwhile at this point. Can you cite a regulation that requires a former employer to...

Sounds like an advisor at Fidelity is looking for some money to manage...for the financial benefit of the advisor.

Moving might or might not be a good idea and is definitely not required unless the plan itself is terminated. Moving to an advisor who is soliciting business is likely not a good idea.

Scratched. This was a poor answer.

I don’t quite understand why if we’re 99% sure of not outliving our money, we should move our money to a less risky allocation that’s so expensive. So they can make some money. Simple as that. There is no benefit to you. In fact, by paying them the 1%, you are reducing what you can safely spend yourself...thereby INCREASING your risk. The generally accepted "safe" withdrawal rate has historically been 4%. That includes all your expenses...including what you pay for investment advice. If you are spending 4%, then paying them 1% leaves you with only 3% to spend on yourself. Go figure out how that is a good thing for you. If you feel the need to reduce your risk, just increase your bond allocation. However, there is no indication in...

Welcome to the forum.

Yes, a CD in taxable would have to return 7.69% in order to get the same return as 5% in Roth IRA. I do not know if CDs are subject to the NiTT, but it seems like that could make it even higher.

Many people here like to avoid putting bonds or other "low paying" investments in Roth IRA because the earnings in Roth IRA are tax free if you wait long enough. So many people here would not put a CD in Roth IRA. However, if it suits your needs for the overall portfolio, I don't see a problem with it myself (although I would not put a large portion of my Roth IRA into CDs).

bslice wrote: ↑Sat Mar 25, 2023 4:37 pm

Dottie57 wrote: ↑Sat Mar 25, 2023 3:52 pm

MrJedi wrote: ↑Sat Mar 25, 2023 3:19 pm This is plan specific. My plan has always allowed for after tax contributions without maxing the pretax/Roth deferrals first. There is no law saying you must max that first.

My plan too allowed both types at same time

But Why? Why would you contribute to the non-deductible bucket when you havent maxed out the Traditional 401k/Roth 401k annual max of 22.5k?

Because you know you will be able (have the money) to contribute to both. There is no reason to do one and then the other. It might also be a way to get a full employer match (depending on the plan) while contributing to both.

Have you gotten a refund since then...for some other tax year? If not, I would wonder if your next refund will trigger the $7 to get unstuck or trigger your next refund to get stuck. I'm guessing the former, but it is just a guess. However, if it is the latter, maybe it would take the same effort to fix then as now. Both 2021 and 2022 I had overpayments fully applied to the next year without problem. I can even, already, see my 2022 overage applied to 2023. In that case, I don't see a problem or a downside (but that is mostly a guess). I'd probably write a letter, not wait on the phone, and hope to get the tax year closed. Someone said recently they got a real person on the phone when they called a local IRS office to make an appointment. ...

Have you gotten a refund since then...for some other tax year?

If not, I would wonder if your next refund will trigger the $7 to get unstuck or trigger your next refund to get stuck. I'm guessing the former, but it is just a guess.

However, if it is the latter, maybe it would take the same effort to fix then as now.

The rules have not changed. The rules for your plan have changed. This is actually more flexible.

In the situation you describe, you do not "re-characterize" to Roth IRA. You are "converting" to Roth IRA.

For your 2022 taxes, you report a non-deductible contribution to IRA on form 8606. This will leave a basis of $6k on line 14 for you to use in the future. You did not do a Roth conversion in 2022 so there is no Roth conversion to report.

For your 2023 taxes, you report both a non-deductible contribution for 2023 (if you do one) and a Roth conversion of $12k (or whatever gets converted).

Here is a thread about an Allan Roth article on direct indexing.

viewtopic.php?t=400137

My favorite part...."The 1099 tax form on my little $5,000 direct indexing experiment is 86 pages!"

I try to keep between $5k and $10k in the credit union - pretty low rates for sure.

I have very little cash other than that - just what is sitting in settlement accounts, and I try to keep even that invested.

Long time follower, posting for 1st time. During the last few years, I tried my hand at diversifying the portfolio and now have unwieldy portfolio. One of the goals for 2023 is to simplify and eventually towards an 80/20 VTI-BND portfolio. However, I do not want to do all of them overnight in one go and structurally move them in a meaningful way. Which of these would you recommend targeting to sell for 2023. Tax bracket: 32% Holdings are in a taxable brokerage account Cost basis: SpecID Symbol - Description - Quantity - Gain/loss BND - Vanguard Total Bond Market ETF - 104.237 - ($1,408.32) BNDX - Vanguard Total International Bond ETF - 68.084 - ($576.51) IVOO - Vanguard S&P Mid-Cap 400 ETF - 205.282 - ($1,610.04) MGK - Vanguard Mega Ca...

OldSport wrote: ↑Sat Mar 25, 2023 11:18 am

retiredjg wrote: ↑Sat Mar 25, 2023 11:16 am Do you have an active 401k or similar plan at work that you could roll the pre-tax portion of your IRA into?

No. My plan does not allow this. It's a pain. Spent a lot of time looking into it. They only allow 401k direct rollovers into the plan. They do not permit rollover into the plan from a rollover IRA, pretax or otherwise. Spent A LOT of time trying to do this unsuccessfully last year.

Sorry, you already told us that. I just didn't go back and refresh my memory before posting.

Well, you are already "into" the pro-rating quagmire at this point. Apparently it was worth it to you to do that first backdoor. Maybe you can just clean up the rest of this over 2023 and 2024 and move on and not worry much about it.

Leesboro will be our "test case".

Do you have an active 401k or similar plan at work that you could roll the pre-tax portion of your IRA into?

I think the math works out to be the same whether pro rata 2022 after tax is 6/(6+19.5) plus an additional $18k fully taxable or 6/(6+37.5) after tax ratio applied across the full $24k converted. It just asks me my basis at end of 2021, which is $0 and basis at end of 2022, which remaining non-converted TIRA balance was $19.5k. Neither of those is the calculation that the form uses to determine how much of your $24k Roth conversion is taxable. That is because the value of the IRA at the end of the year is part of the calculation - but not included in your thinking above. I think you are using the term "basis" correctly in some places and incorrectly in some places. When talking about tIRA, basis means "already taxed dollars&...

Pinacoladapopsicle wrote: ↑Sat Mar 25, 2023 9:14 am A series of innocent mistakes and now I'm in a total mess.

It may seem like a total mess, but this is completely fixable by using the "pour out" method mentioned above. And doing the 8606 for the year in question awhile back. Then convert the remaining amount to Roth and start your backdoor contributions after that. Try to keep the backdoor contribution and conversion in the same tax year because it is easier to understand, remember, and document.

This can be put behind you in a few weeks. A lot of people have been in your shoes and done this.

I contacted Empower Retirement to rollover my Roth 457 plan to my Vanguard Roth IRA. They informed me that some screwup has all my 457 in a Roth except for about $1,400. Since I'm only eligible for non deductible IRA, can I rollover this $1,400 to a non deductible IRA and somehow backdoor convert it a Roth or will it count towards my 2023 contribution limit which I've actually already hit so I'd have to let the money sit there till 2024. Your $1,400 will rollover to traditional IRA as pre-tax dollars. Your "eligibility" does not affect a rollover. You can leave it there or convert it to Roth IRA if you are willing to pay the tax on $1,400. It is also possible to just roll it directly into Roth IRA. Some people prefer not to do th...

stargazerlily03 wrote: ↑Fri Mar 24, 2023 6:32 pm Form 1099-R (OK, not a WKS) under Rollovers, Roth Conversions, Roth Rollovers, Recharacterizations. Item B4 states the total amount of his pension as amount of this distribution that may be rolled or converted to a ROTH IRA. Is the key word "May?" The amount is the total pension although I checked the box that they were monthly payments rather than a lump sum.

I'm sorry but I don't know what/where Item B4 is. Can you be more specific?

Are you sure this is a pension?

It is possible he is just getting monthly distributions from a 401k type account? That could be rolled into IRA or converted to Roth IRA.

What is in box 7 of the 1099R?

Here is an example of what a simple portfolio could look like. Portfolio = $286k Brokerage - $65k. 22.7% 22.7% Total Stock Index 401k $41k[. 14.3% 6.7% 500 index 7.6% bonds Roth IRA - $53k 18.5% 18.5% 500 index Rollover IRA - $127k. 44.4% 32% Total International 12.4% bonds This is not a suggestion of what you should do and it does not take into account the cost of liquidating the taxable account. There is not enough information to make a suggestion based on those things. It also assumes that all of the accounts you have told us about are intended for retirement, not short term goals. If/when you decide you want to manage this on your own, specific details about your situation would be needed to help you decide how to set this up.

See if the instructions here help you figure out how to enter this into TT. https://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html Doing taxes, the $18k is a taxable distribution without penalty, as expected. And the $6k conversion is subject to pro-rata, so that would be (19.5/25.5) x $6k in taxable, as expected. I don't think you have this part right. The entire $24k is converted and pro-rated. My question becomes what happens in future with 2023 $6k after tax TIRA contribution & subsequent conversion? There is a (19.5/25.5) x $6k that was taxed on the 2022 conversion from pro rata, even though the entire $6k was after tax TIRA contribution. Every time you take money out of IRA to spend or to convert, it will be pro-r...