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JustTheBeesKnees said:   
mikemoto said:   
atca1999 said:   so i transfered an old roth from like a decade ago into ameritrade.. my question is, when it comes to withdrawing in XX years, how does the government know its a roth ira? on my taxes i just indicate that?
1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

 Atca1999... is right on the money.  Clearly you haven't pulled money out of your Roth IRA(s) before.  At the end of each year that you do withdraw money from your Roth, your investment firm will send you a 1099-R form that indicates how much you pulled out that year.  But remember, this only "really" matters if you are pulling it out before retirement because the government will want to know if any of the money you pulled out included interest.  If it was only your contributions (i.e. you deposited $5,500 and withdrew $1,000) then you are clear of tax liability.  Once in retirement.. you're in the clear.  Aaaahhh... dreaming of that day if it ever comes.

  Good luck with that. When the government runs out of money, you know the first thing they'll start taxing is Roth IRA earnings...

rated:
Hey guys,

I'm 29 years old, Single w/ 100k Salary. No debts or student loans.  Currently renting an apartment in NYC. I have ~35k in Savings. ~45k in a Traditional Rollover 401k Account, and ~5K in my current company's Traditional 401k.

My employer actually offers BOTH Traditional 401k and Roth 401k. 6% Match after the first year, which starts next month.

I've been reading up on Roths. Seems like something I should take advantage of. I was thinking of upping my contributions and splitting it between the two types of 401ks. Right now I'm doing just 6% in a Traditional 401k. Thinking of doing 6% in Traditional AND 6% in Roth. I've also been doing 3% in my employer's ESPP.  

Good idea?  

Any reason I should change up those percentages? Higher on one? Lower one one? Higher/Lower on both?

Appreciate the feedback.

rated:
I would rather do a Roth IRA than Roth 401k with employer, however you are over the income limit. If the Traditional Rollover 401k Account is truly a 401k and not an IRA, then you could do backdoor Roth IRA. Or if your "Rollover 401k" actually is an IRA, if you can roll that into your current employer's 401k then you could do backdoor Roth IRA. That maxes out at 5.5K. If you have more to save on top of that (seems like you should with no dependents, no debts, and 100k income), then maybe some Roth 401k. I like to diversify and do so, but at a similar income level I favor Traditional to Roth. Keep in mind that you company's 6% match will be in Tradition regardless of whether you do Traditional or Roth, so that weights you heavier in Traditional.

rated:
My Rollover Account (with ~45k) is actually a Rollover IRA, my mistake.  I have that account separate with Schwab. I basically rolled a few old 401k accounts in there at the end of 2012 and haven't touched it since.  What do you mean by backdooring?  Why is the Roth IRA better than the Roth 401k?  

Thanks for the response!

rated:
I'm planning to quit my job this summer and not work for at least the next year and half. I'd like to take advantage of these low income years when it comes to retirement planning.

  • This year I'm contributing $17,500 to a Roth 401(k) since my tax rate will be much lower than usual with only six months of employment.
  • Next year, I would like to convert a Rollover IRA ($7,000) to a Roth IRA. With a standard deduction and personal exemption of ~$10,000 and zero income, I would pay zero taxes on this transaction.
  • Next year as well, I would like to convert a 401(k) ($40,000) to a Roth 401(k). With the remaining $3,000 from the standard deduction and personal exemption and zero income, I would pay ~$5,100 in taxes on $37,000 in income. Of course, the value of these accounts will most likely increase by January 2015 and I'll need to pay more taxes.

Am I missing anything obvious? Retirement accounts aside, is there any other way to benefit from these low income years?
 

rated:
dave4128 said:   Hopefully this is the right place, looking for some suggestions.

33 Years Old, no wife , or GF currently (currently back at parents house).
salary 65k
Looking to buy a House/Condo 250-300k
Cash On Hand 225k
Going to Max 401k this year (did last year - prior to that i wasn't doing enough)
Already did a roth this year and last...

So the question becomes, putting down money on a house... From my reading, I know I should be able to get more in the market than i'd pay in interest in the house so i probably should just put down 20 % or so..  I am FAR from an expert in investing.. So from a FW perspective, what kind of funds should I look into If I put 20 %ish down, and then have 100-150k liquid cash...  Can anyone point me in some form of direction?

 

  You want to open a broker account that does not charge fees for having the account (example: Scottrade, or vanguard with your amount of $$$), there are others.
Then if the $$$ can sit there, meaning you keep some cash for emergencies, you could do what Warren Buffet suggests for his heirs and put it all into
some kind of  S&P 500 etf  one of which is Vanguards VOO  , its fee is: .05%  which is extremely low.
Just don't sell it when the market dips, leave it for years untouched.
 


rated:
traveler321 said:   I'm planning to quit my job this summer and not work for at least the next year and half. I'd like to take advantage of these low income years when it comes to retirement planning.

  • This year I'm contributing $17,500 to a Roth 401(k) since my tax rate will be much lower than usual with only six months of employment.
  • Next year, I would like to convert a Rollover IRA ($7,000) to a Roth IRA. With a standard deduction and personal exemption of ~$10,000 and zero income, I would pay zero taxes on this transaction.
  • Next year as well, I would like to convert a 401(k) ($40,000) to a Roth 401(k). With the remaining $3,000 from the standard deduction and personal exemption and zero income, I would pay ~$5,100 in taxes on $37,000 in income. Of course, the value of these accounts will most likely increase by January 2015 and I'll need to pay more taxes.

Am I missing anything obvious? Retirement accounts aside, is there any other way to benefit from these low income years?

  If you have any regular accounts that have done well, as long as you keep total income for year below (single 37K) you can sell and re-buy those investments to harvest the capital gain tax free. If you have a bunch, might be worth it to hold off on 401K conversion.

rated:
BlueSeaLake said:   
traveler321 said:   I'm planning to quit my job this summer and not work for at least the next year and half. I'd like to take advantage of these low income years when it comes to retirement planning.

  • This year I'm contributing $17,500 to a Roth 401(k) since my tax rate will be much lower than usual with only six months of employment.
  • Next year, I would like to convert a Rollover IRA ($7,000) to a Roth IRA. With a standard deduction and personal exemption of ~$10,000 and zero income, I would pay zero taxes on this transaction.
  • Next year as well, I would like to convert a 401(k) ($40,000) to a Roth 401(k). With the remaining $3,000 from the standard deduction and personal exemption and zero income, I would pay ~$5,100 in taxes on $37,000 in income. Of course, the value of these accounts will most likely increase by January 2015 and I'll need to pay more taxes.

Am I missing anything obvious? Retirement accounts aside, is there any other way to benefit from these low income years?

  If you have any regular accounts that have done well, as long as you keep total income for year below (single 37K) you can sell and re-buy those investments to harvest the capital gain tax free. If you have a bunch, might be worth it to hold off on 401K conversion.

  Thanks for the information. I didn't realize that about capital gains taxation.

rated:
abracadaver said:   Hey guys,

I'm 29 years old, Single w/ 100k Salary. No debts or student loans.  Currently renting an apartment in NYC. I have ~35k in Savings. ~45k in a Traditional Rollover 401k Account, and ~5K in my current company's Traditional 401k.

My employer actually offers BOTH Traditional 401k and Roth 401k. 6% Match after the first year, which starts next month.

I've been reading up on Roths. Seems like something I should take advantage of. I was thinking of upping my contributions and splitting it between the two types of 401ks. Right now I'm doing just 6% in a Traditional 401k. Thinking of doing 6% in Traditional AND 6% in Roth. I've also been doing 3% in my employer's ESPP.  
 

  
No Roth! You are in a high tax bracket in NY state, you want to defer taxes with a Traditional 401k and hopefully retire somewhere with lower tax than NY. I think you should up your contribution % since 29 & single is the perfect time to max out your retirement savings (before kids get in the way). 

rated:
traveler321 said:   I'm planning to quit my job this summer and not work for at least the next year and half. I'd like to take advantage of these low income years when it comes to retirement planning.

  • This year I'm contributing $17,500 to a Roth 401(k) since my tax rate will be much lower than usual with only six months of employment.
  • Next year, I would like to convert a Rollover IRA ($7,000) to a Roth IRA. With a standard deduction and personal exemption of ~$10,000 and zero income, I would pay zero taxes on this transaction.
  • Next year as well, I would like to convert a 401(k) ($40,000) to a Roth 401(k). With the remaining $3,000 from the standard deduction and personal exemption and zero income, I would pay ~$5,100 in taxes on $37,000 in income. Of course, the value of these accounts will most likely increase by January 2015 and I'll need to pay more taxes.

Am I missing anything obvious? Retirement accounts aside, is there any other way to benefit from these low income years?

Ever since I came to the realization that I was an early middle-aged "obsolete", "unemployable" American programmer, I threw in the towel and filed for Chapter 7 bankruptcy a few years ago and became an English teacher abroad, my official income has been $0, so I have been doing a Roth conversion in the amount of my 0% tax bracket (which is the standard deduction + standard exemption + $3K for long term capital loss) - it's essentially a free Roth conversion.  I probably could have be doing more (i.e., up through the 10% & 15% brackets), but I have the feeling that I won't be in any higher tax brackets in the future.
 

rated:
Psycho41 said:   
JustTheBeesKnees said:   
mikemoto said:   
atca1999 said:   so i transfered an old roth from like a decade ago into ameritrade.. my question is, when it comes to withdrawing in XX years, how does the government know its a roth ira? on my taxes i just indicate that?
1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

 Atca1999... is right on the money.  Clearly you haven't pulled money out of your Roth IRA(s) before.  At the end of each year that you do withdraw money from your Roth, your investment firm will send you a 1099-R form that indicates how much you pulled out that year.  But remember, this only "really" matters if you are pulling it out before retirement because the government will want to know if any of the money you pulled out included interest.  If it was only your contributions (i.e. you deposited $5,500 and withdrew $1,000) then you are clear of tax liability.  Once in retirement.. you're in the clear.  Aaaahhh... dreaming of that day if it ever comes.
 

  Good luck with that. When the government runs out of money, you know the first thing they'll start taxing is Roth IRA earnings...
 

That's an interesting concept.  I have often wondered what would happen if folks would have stocked so much of their retirement assets in a Roth that the government would not be getting enough revenue.  I suppose that if the political situation were to be such that there are a lot more folks who are, to use the Romneyesque phrase, "takers" - or otherwise income tax payers (i.e., regular income and traditional IRA distributions, etc.) - than folks who have Roth IRAs, then I could see that side of the Roth IRA taxation debate saying to go ahead and screw the Roth IRA owners (perhaps giving them back the taxes they paid by doing the Roth conversion or by not taking the traditional IRA deduction - perhaps even without an interest ).  Perhaps the addition of a VAT could recover lost taxes, but that would end up hitting folks paying income taxes very hard (especially the workers).

No, I think that the interest group of Roth IRA owners would be sufficiently strong as to deflect this, with the result being confiscatory taxes on the wealthy to overcome any revenue deficit.

rated:
I over-contributed to my 401k a few years ago and as a result I have about $1500 in after-tax money in there. My employer allows in-service rollovers so I should theoretically be able to roll it into my existing Roth IRA. However, whenever I start filling out the form on the website, it seems like I have to roll over a portion that is pre-tax as well for some reason. In other words, if I pick $1500, it ends up saying ~$350 pre-tax and ~$1150 after tax. To roll over the full $1500 after-tax, I need to choose $2000 at which point it lets me to $1500 and $500 pre-tax. 

What is the reason for this weird mix of pre and post tax funds? I called my 401k provider and asked about this but they didn't have a great answer.

Also, if I did a Backdoor Roth conversion this year, how does that affect this?

If I can figure out a way to roll over just the after-tax portion, it seems like I could over contribute a lot (like up to $51k total) and get a lot more $ into my Roth. 

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