Get rid of my Roth IRA?

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Calygos
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Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 9:06 pm

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HornedToad
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Re: Get rid of my Roth IRA?

Post by HornedToad » Sat Oct 13, 2018 9:16 pm

If you can give an advantage to doing so then we can evaluate it. All I see are CONS.

Calygos
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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 9:23 pm

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rkhusky
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Re: Get rid of my Roth IRA?

Post by rkhusky » Sat Oct 13, 2018 9:27 pm

Just leave it as is. While the penalty and taxes to withdraw would be small, why pay them? If you roll over the tIRA to the new 401k, you could then do the Backdoor Roth. Or your situation could change where you can begin to contribute to the Roth.
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arcticpineapplecorp.
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Re: Get rid of my Roth IRA?

Post by arcticpineapplecorp. » Sat Oct 13, 2018 9:28 pm

I know it's a small part of your portfolio but why would you want to take an asset that can grow tax free for the rest of your life and give up the potential of leaving it for heirs (for which they would receive proceeds tax free over their lifetime) and turn it into something that would be taxable for the rest of your life (cap gains and dividends). Yes if you left the taxable account to heirs they would get a step up in basis but then it would still be taxable for them over their lifetime (as opposed to an inherited Roth IRA).

I also don't understand why you'd want to get rid of a Roth IRA if you're planning on doing backdoor Roth contributions? Or are you asking if you should make taxable investments instead of a backdoor Roth?

If I were you I'd do the backdoor Roth and keep the Roth IRA as is.

They say that when it comes to liquidating assets the order is:
Required minimum distributions (RMDs) from tax-deferred retirement accounts (Traditional IRAs, 401(k)s, 403(b)s, 457 plans plus Roth 401(k)s)2
Taxable accounts, such as brokerage accounts
Tax-deferred retirement accounts (Traditional IRAs, 401(k)s, 403(b)s or 457 plans)
Tax-exempt retirement accounts (Roth IRAs and Roth 401(k) plans)
source: https://www.fidelity.com/viewpoints/ret ... ithdrawals
There are exceptions if you're trying to manage your tax rate (and the fidelity article above, as well as the vanguard link below discuss this). But the Roth should be withdrawn either last or second to last. If you liquidate your Roth, you've lost quite an opportunity cost for money to grow tax free. And you can't just put money back into the Roth once you've taken it out (with some limited/time-limited exceptions).

https://www.vanguard.com/pdf/icrsp.pdf
https://www.bankrate.com/finance/retire ... px#slide=3
https://www.bankrate.com/finance/retire ... px#slide=9
https://www.bankrate.com/finance/retire ... px#slide=1
https://retirementplans.vanguard.com/ek ... awals.html
https://www.forbes.com/sites/lawrenceli ... 4712ea3d4e

You also might want to do Roth IRA conversions when older. So why liquidate an account you might actually want to add to later on?

Can you provide some more rationale for why you want to liquidate Roth IRA and contribute to taxable instead of backdoor Roth?
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"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Calygos
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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 9:30 pm

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GerryL
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Re: Get rid of my Roth IRA?

Post by GerryL » Sat Oct 13, 2018 9:31 pm

OK. Here's a story.
In the early 90s I started my investing life by putting the $22k I had in my IRA (which had been in CDs) into a stock mutual fund. Never added another penny as future retirement savings went into my shiny new 401k and, when it became available, a Roth IRA.

About 23 years later, thanks to reinvested earnings and stock market growth, that tIRA had grown to almost $200k*. Now I will soon have to start paying taxes on that money as I take RMDs. I'm not complaining, but if I had been able to leave it to grow in a Roth … wouldn't that be great?

*No longer calculating the growth because I rolled it together with my 401k into a tIRA.

retiringwhen
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Re: Get rid of my Roth IRA?

Post by retiringwhen » Sat Oct 13, 2018 9:32 pm

Late in my career, I only wish for MORE funds in a Roth IRA. Even $10K may come in handy in the future for tax planning. I see no upside to relinquishing the single most valuable tax-advantaged space you can have in the portfolio.

Seriously, I see no positive reason to cash out a Roth. Getting rid of one balance to track is no where close worth it.

The con is that you are giving up potentially decades of tax-free (not deferred) growth. if you put it in taxable, eventually you'll be paying taxes on LTCG and in the interim you'll be paying tax on the annual dividends.

Calygos
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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 9:34 pm

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retiringwhen
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Re: Get rid of my Roth IRA?

Post by retiringwhen » Sat Oct 13, 2018 9:38 pm

Like GerryL above,

My wife put $7K in a traditional IRA in 1989 and we never touched, literally did nothing except leave it in the Vanguard Windsor fund for 28 years. We began a Roth IRA rollover last year and this year consolidated our final active holding in the three-fund portfolio (VTSAX). It took me about 30 minutes a year of attention to keep track of the account.

Last friday it was worth $173,000. She'll be paying full income tax on the funds when RMDs come around.

If you keep it, it'll be 100% tax-free, in my case that makes those funds approximately 29% more valuable.

That ain't chicken scratch for 30 minutes a year.

Make life enough, not too simple.

Calygos
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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 9:39 pm

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DorothyB
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Re: Get rid of my Roth IRA?

Post by DorothyB » Sat Oct 13, 2018 9:43 pm

I would leave it. I have a Roth that is 8% of my total portfolio. I am in my 4th year of retirement.

I look at my Roth as a way to pull a large sum out for one-time purchases without impacting my income tax. If I were to have a large purchase such as a new roof, new truck, etc pulling that money (and the taxes due on it) might bump me up into the next tax bracket.

Calygos
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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 9:46 pm

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retiringwhen
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Re: Get rid of my Roth IRA?

Post by retiringwhen » Sat Oct 13, 2018 9:46 pm

Calygos wrote:
Sat Oct 13, 2018 9:39 pm
Tangent: I really hate how dependent we have become in our society on the stock market for our future individual financial survival. WTF ever happened to just spending less than you earned, saving the rest, and living on that?! Sad state of affairs, IMHO. :annoyed
Those are still rule #1. I think it is nspirius whose tagline is:'Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.'

I told the story of my grandfather who did quite well for himself and his family by working hard, living under his means, creatively, happily and frugally. He died with vast wealth by the measure of this birth family and as far as I know he held nothing more esoteric than a CD in his whole life.

I would guess your desire to simplify is to avoid the investing stuff and time sink, but you can get it to the point, it is not much attention and just runs in the background. that is a core tenant of much of the BH philosophy (not always practiced by many of the folks who post here, me included. Although I have been taking active steps to change that recently after a nearly unhealthy attention to finances in the past 24 mos.)

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arcticpineapplecorp.
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Re: Get rid of my Roth IRA?

Post by arcticpineapplecorp. » Sat Oct 13, 2018 9:47 pm

Calygos wrote:
Sat Oct 13, 2018 9:34 pm
Sorry, I wasn't clear in my OP. I had only considered a Roth conversion based on responses in a previous thread of mine here, but ultimately I decided I didn't want to deal with that kind of complexity (especially since that loophole could get closed) and just to leave the tIRA as is, with the obvious exception of any future 401k rollovers into it. Also, I do and always will contribute to the Taxable account, currently the $1/month I mentioned.
um, maybe I'm not clear or we're using terms differently. You didn't use the term Roth Conversion. I did. You used the term Backdoor Roth, which is not the same as a Roth Conversion. They're two separate things.

When we talk about Roth Conversions, we're talking about converting tax deferred accounts (while managing tax brackets) into Roth IRAs, often before RMDs are required to lessen the size of RMDs to eventually be taken (to lessen tax once SS is taken). You can read more here:

https://www.bogleheads.org/wiki/Roth_IRA_conversion

This is not the same and has nothing to do with Backdoor Roth IRAs which people who have high income and don't qualify for regular Roth IRAs can work around with the back door method: https://www.bogleheads.org/wiki/Backdoor_Roth_IRA

So two separate things. Hopefully that clears that up.

A Roth conversion is not complex at all. And there's no talk of closing Roth IRA conversions. Why would they? You owe tax on the money you convert from tax deferred to Roth.

Are you talking about a backdoor Roth IRA? I can see how that could be viewed as slightly more complex. But that should not stop you from contributing to a Roth IRA though the backdoor method (at least until/unless that gets closed as you say). It's valuable space that can grow handsomely. I wouldn't pass that opportunity up so quickly. You can get help doing it if you think it's complex.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Calygos
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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 9:53 pm

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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 9:58 pm

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cheese_breath
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Re: Get rid of my Roth IRA?

Post by cheese_breath » Sat Oct 13, 2018 10:08 pm

Calygos wrote:
Sat Oct 13, 2018 9:06 pm

.....How good or bad of an idea might it be to simplify my portfolio more by liquidating my Roth IRA and put the funds into my taxable account?....
Bad, bad, bad, bad, bad for reasons already given. Simplify your portfolio by leaving it in TSM and ignoring it for 40 years. Then come back and look at it.
The surest way to know the future is when it becomes the past.

Calygos
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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 10:13 pm

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cheese_breath
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Re: Get rid of my Roth IRA?

Post by cheese_breath » Sat Oct 13, 2018 10:17 pm

Calygos wrote:
Sat Oct 13, 2018 10:13 pm
cheese_breath wrote:
Sat Oct 13, 2018 10:08 pm
Calygos wrote:
Sat Oct 13, 2018 9:06 pm

.....How good or bad of an idea might it be to simplify my portfolio more by liquidating my Roth IRA and put the funds into my taxable account?....
Bad, bad, bad, bad, bad for reasons already given. Simplify your portfolio by leaving it in TSM and ignoring it for 40 years. Then come back and look at it.
I've conceded the point. :sharebeer

That said, I'm already in my mid-40s, so it's probably more like only 20 years. :(
Or one of your heirs will get a happy surprise in 40 years. :D
The surest way to know the future is when it becomes the past.

Calygos
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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 10:18 pm

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Calygos
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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 10:18 pm

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cheese_breath
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Re: Get rid of my Roth IRA?

Post by cheese_breath » Sat Oct 13, 2018 10:25 pm

Calygos wrote:
Sat Oct 13, 2018 10:18 pm
cheese_breath wrote:
Sat Oct 13, 2018 10:17 pm
Calygos wrote:
Sat Oct 13, 2018 10:13 pm
cheese_breath wrote:
Sat Oct 13, 2018 10:08 pm
Calygos wrote:
Sat Oct 13, 2018 9:06 pm

.....How good or bad of an idea might it be to simplify my portfolio more by liquidating my Roth IRA and put the funds into my taxable account?....
Bad, bad, bad, bad, bad for reasons already given. Simplify your portfolio by leaving it in TSM and ignoring it for 40 years. Then come back and look at it.
I've conceded the point. :sharebeer

That said, I'm already in my mid-40s, so it's probably more like only 20 years. :(
Or one of your heirs will get a happy surprise in 40 years. :D
See the reply I just posted.
What I saw in your reply was a big IF your the last one to go. So let one of your charities have the big happy surprise or get some heirs instead. :happy
The surest way to know the future is when it becomes the past.

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BoglePaul
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Re: Get rid of my Roth IRA?

Post by BoglePaul » Sat Oct 13, 2018 10:27 pm

Try the Backdoor Roth and the Roth will feel valuable again. A Roth IRA can also come in handy in certain situations.

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arcticpineapplecorp.
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Re: Get rid of my Roth IRA?

Post by arcticpineapplecorp. » Sat Oct 13, 2018 10:50 pm

Calygos wrote:
Sat Oct 13, 2018 9:58 pm
I'm sure I did misunderstand and I'll have to read your reply and the relevant resources more carefully. But this goes exactly to the other point I'm making in this thread. None of this Roth stuff should be a thing, IMHO. How many people actually go anywhere near either backdoor Roths or Roth Conversions? Even allowing for having investment portfolios, 401(k)s, etc. why must there be all this additional complexity in order to feel more confident that we'll have enough on which to retire?

EDIT: I realize the Roth stuff, along with 401(k)s and a slew of other investing complexity, is due to our absurd tax system. We really need to fix that dumpster fire.

EDIT 2: Ironically, I've bought a couple of financial books recently (below) and there's a new one out Tuesday by Alan Greenspan that I plan to get: Capitalism in America: A History.

Crashed: How a Decade of Financial Crises Changed the World
A Crisis of Beliefs: Investor Psychology and Financial Fragility
you may read those books for pleasure, but do not think you'll learn anything about investing from them. May I suggest instead the suggested reading link at bogleheads:

https://www.bogleheads.org/RecommendedReading.php

Those recommended books will actually help you with investing.

Regarding the different types of accounts and such, things might seem complex but the more you learn, the more you'll see they're really just different buckets with different benefits. That being said, I think you're conflating two concepts: 1. additional complexity and 2. feeling confident you have enough to retire. The two have nothing necessarily to do with one another.

If you want to put all your eggs in the taxable basket for simplicity, fine. But that doesn't help you determine if you have enough eggs to retire. See? The more important concept is determining how much you need to retire. Second would be how best to utilize the different types of accounts to accomplish that goal.

For instance, if you end up with $1,000,000 in tax deferred accounts, you really don't have $1,000,000 to spend because you have to pay the (tax) piper (viper?). If you end up with $1,000,000 in Roth you do have $1,000,000 to spend because none of it is taxable. That's why the Roth is so much more valuable and shouldn't be wasted if it's available to you (which it is through a back door Roth). And $1,000,000 in taxable isn't worth $1,000,000 either because if you invested $200,000 and it became worth $1,000,000 you have the potential of taxes on the capital gains of $800,000.

The reason we need enough to retire is because most only have SS to rely on (no pension). And SS is designed to cover basic needs only (room and board). It's not enough to replace your car, pay for cable, use to travel and so on. If you want a standard of living that you've become accustomed to throughout your working years, you will need additional savings/investments to draw upon. How much will depend upon what your spending will be in retirement. This requires some planning. Financial Planning. The bogleheads have many posts on this and there's much info on the wiki.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Calygos
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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 11:00 pm

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arcticpineapplecorp.
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Re: Get rid of my Roth IRA?

Post by arcticpineapplecorp. » Sat Oct 13, 2018 11:04 pm

Calygos wrote:
Sat Oct 13, 2018 11:00 pm
I understand and appreciate your points, which again goes back to my fundamental dislike of our financial system. We've become used to needing to invest to be able to retire thanks to increasing costs, inflationary monetary policy, a ridiculously complicated tax system that needs to be taken out back and shot and replaced with a broad-base low-rate (BBLR) system, etc. The constant striving for effectively infinite economic growth in a fundamentally resource-constrained world of scarcity (with an ever-increasing world population) is going to lead to a major collapse of economies, if not civilization.
I won't dispute anything you've said. But I will remind you that this forum is not for political/governmental/legislative discussions. Learn more here:

rules#section-4
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Calygos
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Re: Get rid of my Roth IRA?

Post by Calygos » Sat Oct 13, 2018 11:05 pm

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FIREchief
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Re: Get rid of my Roth IRA?

Post by FIREchief » Sat Oct 13, 2018 11:58 pm

Is this a joke?? :confused
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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celia
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Re: Get rid of my Roth IRA?

Post by celia » Sun Oct 14, 2018 5:10 am

cheese_breath wrote:
Sat Oct 13, 2018 10:08 pm
Calygos wrote:
Sat Oct 13, 2018 9:06 pm
.....How good or bad of an idea might it be to simplify my portfolio more by liquidating my Roth IRA and put the funds into my taxable account?....
Bad, bad, bad, bad, bad for reasons already given. Simplify your portfolio by leaving it in TSM and ignoring it for 40 years. Then come back and look at it.
+1
If I could only have one type of account, I would wish for it to be a Roth.

(See my signature line.)
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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Re: Get rid of my Roth IRA?

Post by LadyGeek » Sun Oct 14, 2018 3:41 pm

The OP has removed all of his posts.

(Thread locked to end discussion.)
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