Investment

» tjg911 - why convert?

perhaps under certain parameters the rollover ira to roth ira conversion makes sense. using some calculator (vanguard? link at bogleheads?) i looked at converting up to the top of the 15% bracket, say i had an additional $7k or $10k (even this was a guess) and could get it into my roth. a lot of guesstimates were made but i used conservative returns over time for portfolio in rollover ira.
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but the bottom line was that i paid taxes now and in return i got a lower total return in the future. ric edelman discussed this on sunday and said it shouldn't be done. now i know that's a generalization so i wonder if these conversions only make sense if you'll be in a higher tax bracket especially when forced to take rmd at 70 1/2?
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for me presently, retired, single and in the 15% bracket with my income not pushing me into a higher bracket and almost 13 years from rmd in the future, i don't see the benefit. i thought this was a great idea to remove the portion of my ira up to the top of the 15% bracket but that calculator or calculators (i did this 2 weeks ago) did not indicate that. i actually got a better % by waiting to do the rmd vs roth conversion.
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are roth conversions really for the people in the higher and especially going to be in higher yet brackets in the future? perhaps for them they can avoid taxes when passing their estate or for tax free income when paying lower taxes now knowing you'll be in the higher brackets in 5 or 10 years?
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tom

-- posted by tjg911

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» allancoleman - why convert?

In response to why convert? posted by tjg911:

The general advice I always give to investors , Tom , about whether to do Roth conversions is :

Only do Roth conversions if you expect to be in a higher tax bracket when you retired or if you don't care for your RMD at age 70 . It's pretty easy to figure your first RMD by guesstimating your deferred account balance at age 70 and dividing that amount by 27.4 and that's your first required minimum distribution . It my own circumstance if I didn't start my Roth conversion strategy when I did when they were first allowed , I would have been in the highest tac bracket FOREVER after age 70 because of the growth of my deferred account balance . So I figured it was better to convert and pay taxes in the 25% marginal income tax bracket now or at the 13% effective tax rate now then the 35% marginal tax bracket later or really the very soon to be 40% top bracket and higher if the democratic presidential runners get the legislation passed that puts no top stop on the FICA and other taxes that could easily put the top tax bite in the higher income tax states at approximate 65% . Bob Brinker has discussed this almost every weekend on his show .

If the top federal tax bracket is even as low as 40% and you add 10% for the state and probably more for a particular city like New York , then you're easily well above half and if you crank no top stop for Social Security and Medicare , then you're easily to 65% in a big hurry .

It's up top each individual to figure it out for themselves , Tom . Plus Roths pass through to heirs much more easily than do deferred accounts like IRAs and 401(k)s where if you don't watch how you designate who your beneficiary is , that heir could have to take your entire deferred account balance in as little as 1 to 5 years . Imagine if your heir had to take your entire deferred account balance in one single tax calendar year , how much the federal government and the IRS would collect on that tax bill . . ouch .

Yes , Tom , there's a lot to consider when you're looking at Roth conversions . For me NOTHING beats taxfree FOREVER under current tax code .

For more details on Roths , check out :

http://www.rothira.com
And of course read all your friendly IRS publication tables for the details on how if you don't start your first RMD in time , you could be required to take TWO distributions in the same calendar tax year . As if having to take one in one tax calendar year would be bad enough . And try not designating your deferred account heir correctly in the event of your wife's death and having a kid have to pay over 50% income taxes in one single year or have your wife's RMD double because of your death because her divisor is 17.0 instead of that 27.4 I gave you earlier for married couples . Many widows are automaticly kicked into a higher tax bracket at the very time they can least afford it .

-- posted by allancoleman

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» allancoleman - Another Roth discussion

In response to why convert? posted by allancoleman:

For another recent Roth discussion , Tom , see :

http://www.diehards.org/forum/viewtopic....

-- posted by allancoleman

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» tjg911 - Another Roth discussion

In response to Another Roth discussion posted by allancoleman:

thanks allan, i read that thread shortly after posting here!
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you pretty much summed up what i thought, for me it doesn't make sense. as someone that loves to save, the roth conversion looked so tempting especially as i wanted to bleed off some rollover $ into tax free forever $. but like tax free mm funds, you need to be in a high tax bracket to make it work for you otherwise you'd do better in a taxable mm. of course the current tax free mm yield vs the current pmm yield is bass awkwards but this is a fluke not the norm.
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thanks for your views allan. enjoying the cool weather up north? it must be quite a change to go from 72-86 degrees 24 X 7 to alaska temps even now. you certainly live in 2 of the most beautiful places on earth!
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watch out for the moose tho it's not mating season so they are safer now than in the fall. we are developing quite a population of moose in tiny connecticut's north west corner. boy, these critters are super dangerous due to their height. hit a deer and they often are hit at body level but hit a moose and you clip them at leg level sending 1200-1500 pounds straight into the windshield! this is a really dangerous animal in a state as crowded as connecticut.
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tom

-- posted by tjg911

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» allancoleman - Another Roth discussion

In response to Another Roth discussion posted by tjg911:

Hi again Tom . Bogleheads is rather difficult to follow because you have to surf there every day to find a topic interesting , but once a poster starts a topic to his interest and asks their question , you usually get a very wide range of opinions which I like to study and it's much better I think than just asking one person and getting just one opinion .

Definitely agree that tax exempt paying more yield than taxable money market yields isn't normal . Never saw it before . It'll be interesting to see how long it lasts .

Weather is rather cool up here compared to Kona where I was surfing just two weeks ago . Ran down to Homer for a quickie one day trip last Tuesday for an inspection on my driveway work I pay for last December and ordered a follow up pavement job on those three driveways to be done later this summer . Homer probably had more snow last winter than most and I'll return either the last week in May or the first week in June for another longer work trip for the usual weed eating , brush triming , and landscaping work to market those lots next year after the pavement is in later this summer .

Head to North Pole / Fairbanks area this Thursday via the Denali Hyway from Cantwell to Paxton enroute north to install a for sale sign on my North Pole lot for this summer and inspect a prospective driveway route for my last remaining property up there on Chena Ridge by the University of Alaska - Fairbaks . A local neighbor emailed me this weekend on this Chena Ridge property and wants wants to share a driveway to his and my landlocked properties . I'll contact my real estate attorney up there this Friday and see if I can't " piggy back " on my neighbor's easement and share the expenses . I'll return the week before the Memorial Day weekend and then prepare for my second Homer trip that'll be a real working trip .

We do have quite a few moose here in Alaska and a local resident was stomped to death on the Anchorage college campus a couple of years ago outside one of the university buildings . I have been charged more than once getting too close for pictures . They walk the streets and neighborhoods year round . Schools maintain a " moose " watch and bring the kids in off the school grounds whenever there's a moose in the area .

It's nice being back in Alaska , but after a whole summer taking care of real estate chores up here , it'll be good to go back for another winter of surfing . I have my return tickets back to Kona , Hawaii in the top zipper pouch of my carry on baggage with my passport and they are dated for October 24th and the countdown will start later this fall .

-- posted by allancoleman

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» allancoleman - IRA heir distributions

In response to Another Roth discussion posted by tjg911:

One of the nice things about Roths , Ton , is there is no RMD for owners or heirs unlike IRAs . Here is another Boglehead topic on a question regarding a IRA passing to an heir :

http://www.diehards.org/forum/viewtopic....

-- posted by allancoleman

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» tjg911 - Another Roth discussion

In response to Another Roth discussion posted by allancoleman:

good to hear you are having fun up north. stomped by a moose! wow, that's really something. i've read in the rut they'll charge a train and we know who wins that battle! moose are really as dumb as they look and generally docile unless it's the rut or you approach a cow with a calf but that's par for the course across the animal world.
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have fun,
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tom

-- posted by tjg911

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» allancoleman - Another Roth discussion

In response to Another Roth discussion posted by tjg911:

Moose are a whole different animal than deer , cattle , or your average horse . Especially when you're hiking in tall brush and see how big they are and can be - up close without a vehicle window being between yourself and them . Even in my VW camper van they easily stand taller than my vehicle and usually accidents with a vehicle puts the moose either through your front windshield or crushes the roof of your car with you inside . Moose cow and calf or bear sow and cub encounters usually can be extremely dangerous .

I usually do have fun RVing through Alaska on my real estate trips . Especially since I can write off the expenses of gasoline , campground fees , chow , etc , and have always enjoyed the outdoors up here .

-- posted by allancoleman

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» allancoleman - Roth to Roth transfer

Wife just submitted her first institute to institute Roth transfer from Schwab to Vanguard online . I've done three of them . Mine were from Fidelity and two from Schwab to Vanguard when Schwab didn't totally close my Schwab Roth account when I did my first transfer from them .

I'll mail the signed paperwork out certified return receipt tomorrow in the US mail . I'll track her transfer here on this thread so others can see how long it takes .

Wife has one account left with Schwab that she just opened last fall that she'll transfer to Vanguard when this transfer process is completed on this account . One of the reasons my wife decided to quit doing business totally with Schwab was because there were multiple errors on Schwab's part getting her new account opened last fall . We both share the same Schwab rep who already dislikes me for transfering all my Roth money to Vanguard . I expect this rep will be calling the wife about next week like he called me when I did my transfers .

Next order of business for me with Schwab is to transfer my Schwab One account to Vanguard as soon as I sell my company stock in that account and to close my Schwab IRA with distributions this year and next year . Looks like aside from personal checking accounts in Alaska and Hawaii and a couple of credit union savings and checking accounts here in Alaska , we'll be doing all our investing with Vanguard in the future .

-- posted by allancoleman

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» allancoleman - Roth to Roth transfer

In response to Roth to Roth transfer posted by allancoleman:

Mailed wife's Roth to Roth transfer paperwork off to Valley Forge this morning . Used her new Vanguard account number to create a user name and password and saw her first email in her new account that says Vanguard awaits her paperwork to proceed . We'll check next week for further progress . They estimate this transfer will take 20 to 27 days .

For those new to Vanguard , this internal account email system is really neat . This email system is internal to each Vanguard account and does not use an external email address . In my three previous Roth to Roth transfers , I never called Vanguard one single time on the phone and was able to follow the progress of all my transfers from begining to end . Next email should aknowledge receipt of her signed paperwork that I mailed out this morning .

-- posted by allancoleman

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