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If jgcspouse dies unexpectedly early,

Did you forget you were posting with one of your doppels?

PSU
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Fine in good times when the stock market is doing well. But when things turn down or flat, having some extra reserves is good.

It's always possible to spend the surplus if it bothers you. Perhaps a nice trip, a second honeymoon. The sports car or boat of your dreams.

No big deal. Savings is a discipline of value. Don't give it up too soon.
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All this is well and good, but it’s not the only consideration.

A higher rate of withdrawal can put you into a higher tax bracket. As a matter of fact, the assets in your traditional IRA can be enough to take you into a higher bracket just because of the increase in RMD as you get older. The fact of the matter is, that for two people filing jointly, using the standard deduction, and over 65, the income ceiling for the 15% bracket is reached at a gross income of $99,200. That’s not a bad income for just two people.

There’s no real point in withdrawing money if you don’t need it and aren’t forced to by the rules, especially if you’re not spending all you withdraw to begin with. When you’ve spent your entire life living below your means, you’re going to continue doing that. It’s why you were able to have a comfortable retirement in the first place. I’d rather be in a place where I have to remind myself I can afford something than be in a place where so many people are, and have to remind myself I can’t.

Churchy
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Churchy: "There’s no real point in withdrawing money if you don’t need it and aren’t forced to by the rules, especially if you’re not spending all you withdraw to begin with. When you’ve spent your entire life living below your means, you’re going to continue doing that."

If you are 70 years old and have more than you need, and you are already not spending all that you withdraw from your sheltered account, you are likely guaranteeing that you will die with a pile of money that is in a sheltered account. That money will subject your heirs to RMDs that will be taxed anyway. If that money has been shifted to a taxable account in a measured way before you die, you can still grow that money with little or no tax bill (growth stocks, Brk-A, munis, lightly taxed divi stocks, etc.).

Then when you die with a pile of money the cost basis of that money will be set as of the date you die (if it is in taxable accounts) and your heirs will have no RMDs and no taxes on gains earned by you prior to the date of your death. For example, when Dad died he had one small bank stock that he bought in the 1950's for a few dollars that was worth several hundred thousand dollars when he died, and which had a cost basis of several hundred thousand dollars when he died. If that money had been in an IRA all of it would have been subject to RMDs and fully taxed.

It's a first world problem, to be sure. But if you are withdrawing the absolute minimum in RMD's after the age of 70, and not even spending that money, you might as well figure out a way to shift it to your taxable account and create an estate that is not subject to large RMDs and taxes on the withdrawals.

I am working my way through that issue right now. I am working on persuading jgcspouse to stop working 'one more year' year after year and retire at 63. Her combined pension, Social Security and 4% withdrawals will be roughly enough for us to live on, and my income from my taxable account will be a cushion. But what about the money that is accumulating in my IRA? What about my deferred Social Security? I will have to take that money when I am 70, and that money will unavoidably put us in a pretty high tax bracket.

It may make sense for us to intentionally withdraw money from my IRA after we retire but before I start taking SS in order to grow my holdings in my taxable account before my 70th birthday.

I think rich people often learn this stuff from their family whereas many of us who started out poor have to figure it out as we go along.
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I think it's a Good Idea to take more than the RMD to get you to just below the 25% bracket. Put anything not needed for current expenses into a taxable account. Do this early and often, as the RMD will get higher as we age.

CNC
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I think it's a Good Idea to take more than the RMD to get you to just below the 25% bracket. Put anything not needed for current expenses into a taxable account. Do this early and often, as the RMD will get higher as we age.

Why not just convert that amount more than RMD but less than 25% bracket into a Roth IRA instead of taxing a distribution and putting it into a taxable account?

PSU
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OCD: taking, not taxing
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Why not just convert that amount more than RMD but less than 25% bracket into a Roth IRA instead of taxing a distribution and putting it into a taxable account?

If I understand the tax regulations correctly, you can only deposit "income" into a Roth IRA. Distributions from other investment accounts would not count as "income".
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If I understand the tax regulations correctly, you can only deposit "income" into a Roth IRA. Distributions from other investment accounts would not count as "income".

You do understand correctly. I messed up my response. I'll blame temporary insanity.

PSU
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If I understand the tax regulations correctly, you can only deposit "income" into a Roth IRA. Distributions from other investment accounts would not count as "income".

Contributions to a Roth IRA must be in from earned income. Conversions to a Roth IRA from a traditional IRA do not have any income requirements or limitations.

AJ
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If I understand the tax regulations correctly, you can only deposit "income" into a Roth IRA. Distributions from other investment accounts would not count as "income".

You do understand correctly. I messed up my response. I'll blame temporary insanity.

Actually, the strategy you outlined: Why not just convert that amount more than RMD but less than 25% bracket into a Roth IRA instead of taking a distribution and putting it into a taxable account? is a valid strategy, once the typo is corrected. It allows for tax-free treatment of the distribution, rather than having to pay taxes on the gains and/or dividends.

AJ
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If you are 70 years old and have more than you need, and you are already not spending all that you withdraw from your sheltered account, you are likely guaranteeing that you will die with a pile of money that is in a sheltered account. That money will subject your heirs to RMDs that will be taxed anyway. If that money has been shifted to a taxable account in a measured way before you die, you can still grow that money with little or no tax bill (growth stocks, Brk-A, munis, lightly taxed divi stocks, etc.).

Actually, I've been thinking about this a lot in the last year. The biggest holding in my IRA reported today. Record revenue, record growth, highly positive outlook going forward. I'm going to have to raise the withdrawal amount for next year and it's going to bump us up into a higher bracket (unless the bottom falls out in the next two months). This is more due to growth than the bump up in next year's RMD percentage. Oh well.

To be honest, the desire to remain in a lower bracket is purely emotional. I know I'm going to have to bite the bullet, anyway. I've actually thought about the ramifications of kicking up the percentage and putting the excess cash to work. We're in a position where the IRA and our taxable account each represent half of liquid assets. It's not quite 50/50, but it's close. I've been thinking of building up the taxable account with a quicker drawdown of the IRA for at least a year. The issue is that growth in the IRA has been so good, I'm hesitant to liquidate just yet. Fortunately, there's a sufficient cash reserve that I can do a substantial increase without having to liquidate anything for a year.

It's a first world problem, to be sure.hurchy

Ya think? Given a choice of problems to solve, it's better choice than a lot I can think of. I'll figure it out.

I think rich people often learn this stuff from their family whereas many of us who started out poor have to figure it out as we go along.

More than likely they have hired guns to do the heavy lifting from a financial perspective.

Churchy
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i have read the fool boards for years and i have never remember

seeing this issue discussed...my parents retired many years ago

he wasn't a doctor, lawyer, or a corporate titan....he was just

a working stiff. the last 5 places my father worked all closed

their doors....my mom retired as a food stamp caseworker...

they weren't doing too bad in retirement. they did a few short

trips around the lower 48 and were enjoying themselves until

the doctors discovered a very fast growing aggressive cancer

in my mother...she was gone a few weeks later...my dad got her

small IRA but lost her social security income as well as a small

pension from the state of indiana...my mother said women outlive

men so i am not going to take the survivorship option on the pension.

it would have cut that pension 25%...

This story leads me to my question: All you married folks out there

in fool land...have you factored in what happens to your income

if one of you dies and a chunk of the income is no longer there?

I sure hope you do and don't get surprised....my father went on to

live almost 25 more years and yes i do miss them...

I hope this story helps the retirement planning for someone!
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Contributions to a Roth IRA must be in from earned income. Conversions to a Roth IRA from a traditional IRA do not have any income requirements or limitations.

Does this work for a 401(k) too? Can I do conversions from my 401(k) to my Roth IRA?

culcha
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Churchy: "The issue is that growth in the IRA has been so good, I'm hesitant to liquidate just yet."

Don't forget that you can just shift the investment from the sheltered account to the taxable account and pay the tax from savings. Then let it grow in the taxable account....
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The issue is that growth in the IRA has been so good, I'm hesitant to liquidate just yet.

If you like what you own, don't liquidate, distribute in-kind.

That highly appreciated asset can grow just as well (and likely more tax advantaged) in a taxable account (or converted to a Roth).
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This story leads me to my question: All you married folks out there

in fool land...have you factored in what happens to your income

if one of you dies and a chunk of the income is no longer there



I have posted over and over but without the anecdote - lots of denial and few recs given.
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All you married folks out there
in fool land...have you factored in what happens to your income
if one of you dies and a chunk of the income is no longer there?


Of course!

At my wife's coffee-klatches that subject comes up every so often. Usually after somebody in the area dies. Some of the ladies get a worried look and say, "If either Jim or I died and the one income stopped, the other could not afford to stay here, they'd have to sell the house and move in with the son/daughter."

She tells me that there is a group of women who nod at this and murmur agreement. And another group of women who sit back and don't say anything, just look at each other and give a slight shrug. After awhile, everybody pretty much figures out which group everybody else is in.

When one of the couple dies, their Social Security stops (survivor gets the higher of the two payments, though). Their pension stops, unless, as you say, they took a joint-and-survivor benefit for a greatly reduced monthly payment.

But the stock and bond investments keep chugging along.

If you have $1 or $2 million in stocks & bonds, the loss of pension and SS is not a financial disaster for the survivor.

So that better be the goal you shoot for. $1-$2 million investment portfolio.

Takes a while to get there, though. Better start when you are 30 and not wait until 60.
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Churchy: "The issue is that growth in the IRA has been so good, I'm hesitant to liquidate just yet."

Don't forget that you can just shift the investment from the sheltered account to the taxable account and pay the tax from savings. Then let it grow in the taxable account....


There's one thing I didn't mention. I'm not big into the whole asset allocation thing (see link below). My portfolios (deferred and taxable) are pretty concentrated and if I were to follow your advice and do it all at once (instead of piecemeal over several years - maybe about 10), well let's just say I wouldn't be kicked into the 25% bracket, but actually into the top bracket. That ain't going to happen. My deferred port has several stocks, but my taxable, which started out somewhat diversified, now contains only 1 - AAPL, which I've held for nearly 20 years.

The other violation of conventional wisdom is that my deferred portfolio contains way more than 10% of my former employer. That's the one, after a long drought, that has taken off in the last year. The absolute best I could do with respect to your suggestion is to buy 1000 shares in taxable, liquidate 1000 shares in IRA and use the proceeds to fund withdrawals. As far as I'm concerned, I figure I'm better off having the cash on hand in the taxable account as I made the mistake of being caught cash short during the "Great Recession", so I'll just do what I've done so far, which is piecemeal IRA liquidation with proceeds funding withdrawals.

Here's the link I mentioned above: https://alphaarchitect.com/2015/06/29/charlie-munger-on-load...

Churchy
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There's one thing I didn't mention. I'm not big into the whole asset allocation thing (see link below). My portfolios (deferred and taxable) are pretty concentrated and if I were to follow your advice and do it all at once (instead of piecemeal over several years - maybe about 10), well let's just say I wouldn't be kicked into the 25% bracket, but actually into the top bracket. That ain't going to happen. My deferred port has several stocks, but my taxable, which started out somewhat diversified, now contains only 1 - AAPL, which I've held for nearly 20 years.

You don't need to do it all at once. You can choose to move some of your shares from your traditional IRA to your Roth, and pay the tax from other funds. That keeps you in the exact same positions you have now, but puts the shares in a different place. So if you have 1000 shares of AAPL, maybe you move 200 this year, 200 next year, etc. Nothing says you have to move the entire position.

The absolute best I could do with respect to your suggestion is to buy 1000 shares in taxable, liquidate 1000 shares in IRA and use the proceeds to fund withdrawals.

This just doesn't make any sense to me. Why would you need to do the purchase and sale as you have described? Just transfer those shares in-kind from the IRA to the Roth, so you still have the 1000 shares without need of paying any transaction fees. You get the basis of the FMV when you move the shares out of the traditional IRA, which is as though you had done the purchase on that date. And it counts as a withdrawal. The withdrawal does not have to be in cash if you don't need to have it in cash to be able to spend it.
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Does this work for a 401(k) too? Can I do conversions from my 401(k) to my Roth IRA?

If your 401(k) plan allows you to take the money out, you can do a rollover directly from your 401(k) to a Roth IRA. Or, if your plan has a Roth option in the 401(k), and it allows you to do conversions, you could do a conversion within the 401(k).

IIRC, you are still working, so your plan is what will dictate what you can do with your money now. After you leave your job, you should be allowed to roll all the money over, and choose how much you want to move to Roth vs. Traditional IRAs. Or, if your plan allows for partial withdrawals after you have left your job, you could potentially do a partial rollover into a Roth IRA. The 401(k) plan rules will still dictate how you can take the money out, but are typically more flexible after you have left your job.

AJ
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Don't forget that you can just shift the investment from the sheltered account to the taxable account and pay the tax from savings. Then let it grow in the taxable account....

Or do an in-kind conversion to a Roth, rather than move it to a taxable account. Same current tax impact, but a way better future tax impact.

AJ
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The other violation of conventional wisdom is that my deferred portfolio contains way more than 10% of my former employer. That's the one, after a long drought, that has taken off in the last year.

Is the stock of your former employer in an IRA, or is it still in a 401(k)? If it's still in a 401(k), you might want to look at the Net Unrealized Assets (NUA) rules. Here's a brief explanation:

If your account in your former employer's 401(k) contains that employer's stock, you are allowed to take the stock out and move it to a taxable account, paying taxes only on your cost basis in the stock. So, if you paid $10k for the stock, and it's worth $100k now, you would only have to pay taxes on $10k, not on $100k. (Note: if you are under 59 1/2, you will also have to pay a 10% early distribution penalty.)

The stock in the taxable account is considered a long term holding with the basis that you paid the taxes on, averaged across all of the shares. As you sell it, you will have to pay long term capital gains taxes on the gain that you realize.

The 401(k) plan will dictate if you can do a partial withdrawal from the 401(k) to implement this strategy, or if it must be part of a total rollover out of the 401(k).

If you have already moved the stock over to an IRA from the 401(k) (or you had originally purchased it in the IRA), the NUA option is not available to you.

AJ
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Rayvt: At my wife's coffee-klatches that subject comes up every so often. Usually after somebody in the area dies. Some of the ladies get a worried look and say, "If either Jim or I died and the one income stopped, the other could not afford to stay here, they'd have to sell the house and move in with the son/daughter."

The more obvious option is to just sell the house and move to less expensive digs. For many (most?) Americans, the house is the single largest asset, and with a little thought they should plan on using that money. If they are (as seems likely) advanced in years, it would be hoped that the house is mortgage free, so they are living in a large chunk of money - assuming they haven't kept re-financing to take money out of the house. That hunk of money (I still assume they are advanced in years), even in an annuity, would provide the survivor with income for the rest of their lives.

It also sounds as if they have too expensive a house if they need both incomes to make the payments in their later years.

CNC
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"If you have already moved the stock over to an IRA from the 401(k) (or you had originally purchased it in the IRA), the NUA option is not available to you."

Where are the rules governing setting up a Roth IRA when you make too much money to contribute to it in the first place? Can you set one up with no money in it and then convert to it?
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The more obvious option is to just sell the house and move to less expensive digs....

One thing about having no mortgage is that you can't really reduce your expenses by downsizing. A $0 payment on a small house is the same as a $0 payment on a larger house.

I think that most of them own their homes free-and-clear with no mortgage. I know that my nextdoor neighbor does.

I do know that most of the neighbors that I figure have plenty of money also have a mortgage. I got snoopy one year and discovered you can access the public county records online, and see anybody's real-estate tax, and mortgage lien, and how much they paid for the house.

That hunk of money (I still assume they are advanced in years), even in an annuity, would provide the survivor with income for the rest of their lives.

You have to live somewhere. They own it free-and-clear, so no house payment. Selling the house and moving into an apartment means they'd now have a monthly rent expense that they don't have now.

I dunno, how do you tell a 75 year old widow to sell her $150,000 house, move into an apartment, and hope that she doesn't life too long and run out of money?


It sucks to not be financially independent.
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"If you have already moved the stock over to an IRA from the 401(k) (or you had originally purchased it in the IRA), the NUA option is not available to you."

Where are the rules governing setting up a Roth IRA when you make too much money to contribute to it in the first place? Can you set one up with no money in it and then convert to it?


Yes, you can open a Roth account to make conversions into even if you make too much money to make contributions. You can read the rules on conversions in IRS Pub 590-A https://www.irs.gov/pub/irs-pdf/p590a.pdf

If you have no other traditional IRAs (because, for instance, you've moved all of your traditional IRAs into a 401(k)), you can also do a back door Roth by making a contribution to a non-deductible IRA and immediately converting to a Roth IRA.

But NUA is not about moving stock to a Roth. It's moving it to a taxable account, and being able to pay taxes on the amount you paid for the stock, rather than what it's currently worth.

AJ
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rayvt: "One thing about having no mortgage is that you can't really reduce your expenses by downsizing. A $0 payment on a small house is the same as a $0 payment on a larger house."

I hate to point out the obvious, but you can invest the difference.

If jgcspouse dies unexpectedly early, I can sell our house for about $450,000, buy a decent smaller house in the county near my daughter for about $200K and make about 2.5% dividends on the $250,000 balance. That would easily pay the taxes, utilities and maintenance on the smaller house.
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One thing about having no mortgage is that you can't really reduce your expenses by downsizing. A $0 payment on a small house is the same as a $0 payment on a larger house.


Huh? Smaller house usually means lower taxes, lower insurance, to start. Sure, your payment is still zero, but more to it than that!

Maintenance is usually less—replacing carpet or a roof on a big house is usually going to be more expensive, as is painting. Yard work might be cheaper on a smaller house. Etc.
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If jgcspouse dies unexpectedly early,

Did you forget you were posting with one of your doppels?

PSU
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No, I explained clearly some time ago on these boards that I am iampops at home and have not figured out how to get to tmf under the jgc123 moniker. I can only do that from my work computer. Sometimes I forget that not everybody knows that.
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Here is how I signed my posts when I first came back:

http://boards.fool.com/roughly-53-of-that-47-are-retirees-wh...
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Now that I have looked it up, I see that you knew that because I told you it about a year and a half ago:

http://boards.fool.com/i-failed-to-participate-for-awhile-an...
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Now that I have looked it up, I see that you knew that because I told you it about a year and a half ago:

It's not one of those thing I find important enough to remember.

PSU
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Rayvt,

You wrote, At my wife's coffee-klatches that subject comes up every so often. Usually after somebody in the area dies. Some of the ladies get a worried look and say, "If either Jim or I died and the one income stopped, the other could not afford to stay here, they'd have to sell the house and move in with the son/daughter."

She tells me that there is a group of women who nod at this and murmur agreement. And another group of women who sit back and don't say anything, just look at each other and give a slight shrug. After awhile, everybody pretty much figures out which group everybody else is in.


That only works if the women are spending within their means.

My mother is in the later group. She would be one to just shrug. To her, her money is more than sufficient for her needs and she probably wouldn't tell you if it wasn't...

But my mother is spending unwisely. My current projections have her running through her savings in less than 4 years. She'll be down to just social security income.

I've told her my projections. But she still refuses to budget. She might have to sell her house when that happens and move in one of the kids.

My point is that just because they are nodding doesn't mean they really understand the position they are in.

- Joel
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All you married folks out there in fool land...have you factored in what happens to your income if one of you dies and a chunk of the income is no longer there?

Yes.

If my wife dies first, my pension (small, was turned over to the PBGC) wouldn't change, I'd lose her social security (so the total would be 67% of what it was for the two of us), and the withdrawal on our assets (401ks, IRAs, Roth IRAs, other assets like home equity) wouldn't have to change. But, the expenses would go down some from having one less person's food, medicine, etc., to pay for.

If I die first, my pension would go to 67% (but is small), her social security would step up to mine (meaning she'd lose hers, so SS would be 67% of what it had been), and the withdrawal on our assets (401ks, IRAs, Roth IRAs, other assets like home equity) wouldn't have to change. But, the expenses would go down some from having one less person's expenses to pay for.

At today's rates, I don't think we'll be getting an annuity. But, I see that there are often options for a single person's lifetime with no survivorship, 67%, and 100% survivorship. I'll worry about that if I ever change my mind about getting an annuity at all.

I see some people buy life insurance on one of the couple, but that's got to be phenomenally expensive. Maybe the value is covering inheritance taxes or something. That's not going to be something I'm very worried about.

There are probably some aspects or situations that I haven't got covered, which is why I pay attention to this kind of discussion. It's also amazing to me that some people don't even think about that stuff because it's unpleasant, like people who don't make out a will or health care proxy.
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I think rich people often learn this stuff from their family whereas many of us who started out poor have to figure it out as we go along.

Another reason to pay a financial advisor a fee to run though your finances with you, even if you don't have an advisor that helps you select investments for X% of all assets under management.

Not only that, but the rules change continuously.
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I think it's a Good Idea to take more than the RMD to get you to just below the 25% bracket. Put anything not needed for current expenses into a taxable account. Do this early and often, as the RMD will get higher as we age.

If you really REALLY don't want to spend the money you took out of the IRAs, use it to pay the taxes on the conversion of the IRAs to Roths. That moves more money out from being subject to RMDs, and is a lot nicer to inherit.
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You don't need to do it all at once. You can choose to move some of your shares from your traditional IRA to your Roth, and pay the tax from other funds. That keeps you in the exact same positions you have now, but puts the shares in a different place. So if you have 1000 shares of AAPL, maybe you move 200 this year, 200 next year, etc. Nothing says you have to move the entire position.

It looks like you didn't actually read what I wrote. The AAPL is in my TAXABLE account. It always has been. I don't have a Roth. Never have had a Roth. I have a taxable account and a self-directed conventional IRA, which was converted from my company's 401K a number of years ago. As long as I can stay in the 15% marginal bracket, all the dividend income from AAPL is Federal income tax free. However, it's looking increasingly likely that this is going to be the last year I can stay in the bracket.

I am aware that I can do an in kind transfer from a conventional IRA to a Roth (with tax consequences, naturally). Of course, the fly in the ointment is that I would have to have a pre-existing Roth. I don't have one. In order to qualify for a Roth, it's my understanding that I would have to get one of those things where people show up on time to the same location on a regular basis and do something called work and they get paid for it. I used to know what those things were called, but it's been a while and I've forgotten. I actually had one of those things once. It's a been there, done that, got the t-shirt kinda thing. No thanks. It ain't worth that kind of trouble. It can be argued that I screwed up by never opening a Roth, but that ship disappeared over the horizon a long time ago. I'll live with the consequences.

Churchy
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I am aware that I can do an in kind transfer from a conventional IRA to a Roth (with tax consequences, naturally). Of course, the fly in the ointment is that I would have to have a pre-existing Roth.

Well, you could also do an in-kind transfer from your traditional IRA to your taxable account. The point, which you apparently missed, is that you do not need to sell in the IRA, take cash out of the IRA that you don't need to be spending, and then use that cash to buy the same stock in your taxable account. You can transfer the shares in-kind from the IRA to your taxable account, and pay the taxes out of other funds or sell some of the stock either before or after it comes out of the IRA.

You had all these gyrations, and it didn't need to be that complicated. The fact that I erroneously thought you had a Roth and wanted to move it there is actually irrelevant.
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I am aware that I can do an in kind transfer from a conventional IRA to a Roth (with tax consequences, naturally). Of course, the fly in the ointment is that I would have to have a pre-existing Roth. I don't have one. In order to qualify for a Roth, it's my understanding...

Your understanding is wrong.

Nobody has to "qualify" for a Roth. Anybody can open one. It's just that in order to contribute money to a Roth you have to have earned income.

A few minutes with google answers the questions.
IRS Pub 590-A.
When Can a Roth IRA Be Opened?

You can open a Roth IRA at any time. However, the time for making contributions for any year is limited.

In your case, you wouldn't be making contributions, so none of theose details matter.



Note this:
Conversions

You can convert a traditional IRA to a Roth IRA. The conversion is treated as a rollover.
...
Same trustee.

Conversions made with the same trustee can be made by redesignating the traditional IRA as a Roth IRA, rather than opening a new account.


I was pretty sure about that, since I once talked to my broker (Etrade) about doing just that.
I think that brokers do it all the time, if you call them they will not even have to research it, they probably even have an online form you could fill it.

Why do people agonize over these questions instead of simply calling their broker and asking them?


*********************************
[edit] Ha! My google-fu skill is still up to par.
At Etrade's site:
"Ready to convert to a Roth IRA? Below are a few helpful links:
Converting an existing E*TRADE Traditional IRA

Convert online now" <<<<<<< Clickable link. You can do it online. Cool.


A little bit further down:
"Transferring a Traditional IRA from another financial institution:

Open both a Traditional IRA and a Roth IRA with E*TRADE. At the end of the Traditional IRA application, make the request to transfer an existing IRA to a new E*TRADE Traditional IRA. Once the assets are at E*TRADE, convert the Traditional IRA to the Roth IRA online, or call anytime for assistance."

https://us.etrade.com/knowledge/education/retirement-and-pla...
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I'm going to have to raise the withdrawal amount for next year and it's going to bump us up into a higher bracket (unless the bottom falls out in the next two months).

If you make any charitable contributions, you could take it from your IRA. Would count towards your RMD but doesn't count towards your taxes owed on withdrawls.

JLC
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Well, you could also do an in-kind transfer from your traditional IRA to your taxable account. The point, which you apparently missed, is that you do not need to sell in the IRA, take cash out of the IRA that you don't need to be spending, and then use that cash to buy the same stock in your taxable account. You can transfer the shares in-kind from the IRA to your taxable account, and pay the taxes out of other funds or sell some of the stock either before or after it comes out of the IRA.

I don't think I really made myself clear initially. I have a bit more than a year's worth of RMD cash sitting in the IRA right now and this is allowing for a 1/3 bump in the amount of withdrawal. I also have an equivalent amount of cash in the taxable account. Were I to use the cash in the taxable account to buy the stock, I have a year to liquidate a like amount in the IRA to fund the RMD going forward and also to let it grow a little longer. I gotta take the RMD anyway. For the initial round, the gyration makes sense. After that......

The default situation is probably going to be to take the AAPL dividend in the taxable account and, over time, buy an ETF like DIA, SPY or QQQ. It has the advantage of dollar cost averaging and not having to think about it too much. The excess cash from the increased IRA withdrawal would be used to maintain a cash reserve for emergencies or a spectacular buying opportunity (think March, 2009). After making the mistake of not having a significant cash reserve going into the downturn, I'm not about to make that mistake again. We survived, but it could have been not only easier, but more lucrative coming out of it.

Anyway, thanks for the input.

Churchy
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Your understanding is wrong.

Nobody has to "qualify" for a Roth. Anybody can open one. It's just that in order to contribute money to a Roth you have to have earned income.


I didn't see that. I visited Fidelity, and I don't recall seeing anything that specifically said you could open one as a non earned income retire. It was unclear from what I could see.

My IRA's at Fidelity. I'll talk to them this week.

Thanks for the info.

Churchy
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One thing about having no mortgage is that you can't really reduce your expenses by downsizing. A $0 payment on a small house is the same as a $0 payment on a larger house.

Huh? Smaller house usually means lower taxes, lower insurance, to start. Sure, your payment is still zero, but more to it than that!

---
and

utilities are usually lower - less 'space' to heat and cool

Less room to clean - and if you need a cleaning lady, less money

A big house goes through more money - and maybe you move into a condo or place where they do the grass cutting, snow shoveling, etc.


t.
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I didn't see that. I visited Fidelity, and I don't recall seeing anything that specifically said you could open one as a non earned income retire. It was unclear from what I could see

Well, sure, they wouldn't say anything like that. It's like you were looking for them to explictly say that you had to be a human being to open an account--and since they didn't say anything about it you assumed that you, a human being, weren't qualified. Or like, "Is a female allowed to open a ROTH?" They don't say a female is allowed to, so you assume she isn't allowed to?

People & brokers don't generally mention things that don't matter, they only mention things that do matter. There's an infinite number of things that don't matter, and they will not list them. Because....they don't matter.[*]

Since you mentioned Fidelity, I went to their site, and clicked on the "Open A ROTH" link, and then read this:

What You'll Need to Provide To open an account:
* Identifying information (Social Security number, date of birth, etc.)
* Contact information (legal/mailing address, email address, phone number)
* Employment information, if applicable (occupation, employer's name and address)


No mention of job, or of being a human, or sex.

Hmm, "Employment information, if applicable." That kinda implies that employment status may *not* be applicable.

At any rate, a phone call will clear it up.

========================
[*] Huh, I just thought of one thing that could potentially matter, but be unmentioned. Whether you had to be a US citizen to open a ROTH. I could see how they might not mention it (if it was a requirement), because they'd assume that anybody who wanted to open a tax-advantaged account in the US with a US broker was a almost certainly a citizen.
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iampops,

You wrote, No, I explained clearly some time ago on these boards that I am iampops at home and have not figured out how to get to tmf under the jgc123 moniker. I can only do that from my work computer. Sometimes I forget that not everybody knows that.

I didn't know. I also don't read all the boards. But you know what I do know?

Posting as a dopple is a clear violation of The Fool's Terms of Service. https://www.fool.com/legal/terms-and-conditions/fool-rules?d...

Quoting:

1. Registration

Except as expressly provided in these Terms and Conditions, members may only maintain one active registration with The Motley Fool. In other words, it's one registration per person. The only exception to this rule is if you wish to create more than one CAPS profile, in which case you may have a corresponding number of registrations. Any other use of multiple accounts or aliases on our Services, including attempts to mislead, defraud, confuse or otherwise trick us or our members, is a breach of these Terms and Conditions.


Also your excuse seems pretty pathetic. The Fool's sign-in page has user name / email address and password recovery links. It seems pretty unlikely you cannot figure out how to recover your account.

But assuming you are correct and you cannot recover the sign-in credentials for jgc123, it doesn't explain why you persist in maintaining both accounts. Use one or the other. The use of both as you have done here is a TOS violation.

- Joel
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joelcorley: I've told her my projections. But she still refuses to budget. She might have to sell her house when that happens and move in one of the kids.

Why does selling the house automatically mean move in with the kids? How about buying a less expensive house? Or a condo?

CNC
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cannadir: All you married folks out there

in fool land...have you factored in what happens to your income

if one of you dies and a chunk of the income is no longer there?


Income would go down by the amount of the Countess's social security (She would get my amount if I croak first.) Since we don't and won't depend solely on SS, we will live the same as before.

CNC
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Income would go down by the amount of the Countess's social security (She would get my amount if I croak first.) Since we don't and won't depend solely on SS, we will live the same as before.

Who would be the other half of the "we" at that point ?
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I am aware that I can do an in kind transfer from a conventional IRA to a Roth (with tax consequences, naturally). Of course, the fly in the ointment is that I would have to have a pre-existing Roth.

Fidelity will create a Roth IRA for you as part of the convert (rollover) process.
https://www.fidelity.com/building-savings/learn-about-iras/c...

One thing to be aware of... you cannot convert (rollover) your RMD to a Roth IRA. So deal with the RMD first, then rollover afterward. If you don't... the RMD will be treated as an excess contribution and you’ll pay a 6% annual penalty while the RMD remains in the Roth. [NOTE: You have until October 15 of the year after the excess contribution to correct it.]
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One thing to be aware of... you cannot convert (rollover) your RMD to a Roth IRA.

We use my RMD to fund the Countess's Roth IRA.

CNC
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No. of Recommendations: 7
CountNoCount,

I wrote, I've told her my projections. But she still refuses to budget. She might have to sell her house when that happens and move in one of the kids.

To which you replied, Why does selling the house automatically mean move in with the kids? How about buying a less expensive house? Or a condo?

I think you are overestimating my mother. You assume she is making responsible financial decisions. If you knew how much she was spending and what she was and wasn't spending it on, you probably wouldn't ask this.

Honestly I don't know that she will even be able to sell the house. With the condition its in, the fact that my little brother is basically using it as a huge storeroom and that she will probably not have the financial ability to fix the place up by the time she realizes she must. I actually suspect the tax man will ultimately take the place from her.

I have tried to help, but I've given up. I've decided I was just enabling her and it became clear that it wasn't really appreciated. Fortunately everyone in the family loves her so it shouldn't be too hard for her to find accommodations once she's thrown everything but her social security income away. It's just a shame to see her squandering their life's savings.

- Joel
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CountNoCount,

You wrote, We use my RMD to fund the Countess's Roth IRA.

I assume you don't mean that precisely. The Countess needs to have earned income to make contributions to an IRA - Roth or Traditional. Social Security, qualified plan distributions and investment income are not considered earned income.

- Joel
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I assume you don't mean that precisely. The Countess needs to have earned income to make contributions to an IRA - Roth or Traditional. Social Security, qualified plan distributions and investment income are not considered earned income.

- Joel


The Countess (and I) own and operate a small drapery and other window fashions store. All the income from there is attributed to her. That's basically correct, as she does all the selling and I help out with installations.

CNC
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Well, sure, they wouldn't say anything like that. It's like you were looking for them to explictly say that you had to be a human being to open an account--and since they didn't say anything about it you assumed that you, a human being, weren't qualified. Or like, "Is a female allowed to open a ROTH?" They don't say a female is allowed to, so you assume she isn't allowed to?

No, my assumption was that I couldn't because I didn't have a job coupled with the fact that there's no point in opening an account to which you're not going to contribute. Never really gave a Roth much thought after I left the work force in 2001 and even now am not convinced that it's that good an idea for me since it has never been our goal to fund our kids' retirements by leaving them a large estate. Avoid becoming a burden, yes. Leave them enormous sums of money, no. We paid for their college. Overall, they're doing better than we were at their age. We financed the tools, let 'em fund their own retirements. As for our grandkids, we'll help with college, if necessary, or indulge them in some way, but we're not about dump large sums of money in their laps, either. Of course, we could always do a charitable remainder trust for an organization we support for part or all of the proceeds we leave behind.

There really wasn't any need to be snarky about it. I misunderstood something. You corrected that misunderstanding. I thanked you for it.

Churchy
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I assume you don't mean that precisely. The Countess needs to have earned income to make contributions to an IRA - Roth or Traditional. Social Security, qualified plan distributions and investment income are not considered earned income.

The Countess (and I) own and operate a small drapery and other window fashions store. All the income from there is attributed to her. That's basically correct, as she does all the selling and I help out with installations.


Another possibility that I imagined was that the "excess" money went to pay the taxes on a recharacterization of a regular IRA to a Roth IRA. So, one might still "create" a Roth, but not out of earned income.
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