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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75776  
Subject: Re: Roth Conversion @ Age 52 Date: 2/5/1999 1:11 PM
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Rich writes:

<<I could have researched this question myself through hours of search engine crap or consulted a Wiseman, but I'm entirely too lazy and too Foolish for that so I'm just going to go to the source of all knowledge (dat be you, Dave).>>

I hope you don't really believe that 'cause if'n you do you could on occasion be mistaken. Always find a way to independently confirm what's said here to be safe. Errors in translation can and do occur.

<<Here's the problem. Because of my Foolish success in investing, my investments are growing exponentially (or so it seems). I have a SEP-IRA (I'm self employed) that is now quite large. My other taxable ports are even larger (4x the IRA). I'm 52 and want to start withdrawing from the IRA at 59, if that's allowable. Also, what is the maximum per year I can withdraw from this IRA?>>

You may begin penalty-free withdrawals at age 59 1/2 in any amount you wish. Whatever you take will be subject to ordinary income taxes at the rates in effect in the year of withdrawal. When you reach age 70 1/2, you will be required to make a MINIMUM withdrawal (there is no maximum), and failure to take at least that amount will result in a forfeiture of 50% of what should have been taken but wasn't.

<< I want to drain the IRA prior to my demise (hopefully I can time that better than I can the market) because I know that if I croak and there's still $$$ in it, my warm and fuzzy Uncle Sam is going to procure (a.k.a.: steal) 80% of what's left, correct?>>

Well, if you leave a large enough estate certainly part of it will be swallowed by federal estate taxes, and those start at 37%. Additionally, the heirs will face income taxes on what's left in the IRAs as well. How much goes to the tax man depends on the size of everything at the time you die.

<<The Forbes Conversion calculator http://www.forbes.com/tool/toolbox/calc/RothCalculator.asp says I should convert 100% to a Roth IRA, even though the taxes will be 40% of the principle (Heimlich please, I'm choking to death!). Also the "rules" say that if your taxable income is over $100K (which it is), you can't convert to a Roth IRA, so maybe my efforts are for naught anyway.>>

If your AGI is more than $100K, you cannot convert an existing traditional IRA to a Roth IRA anyway.

<<At this point, I feel that additional investment acorns should be put in the regular taxed ports as I don't want the Fed to tell me when or if I can have the money and then take their pound of flesh besides. In summation ("Thank you, F. Lee Bailey"), my questions are:

1. Should (or even CAN) I convert to a Roth?>>


The question is moot 'cause you can't do it.

<<2. Can I withdraw big chunks starting at age 59 so as to drain the sucker by the time I'm "toes up"?>>

Yep, you can take as much as you wish after age 59 1/2 as long as you're willing to pay income taxes on the withdrawals.

It sounds to me as if your net worth has built up enough where you should be seriously concerned about estate planning. You should see a qualified estate planning attorney who can structure things so as to leave Uncle Sammy as little as possible, to give you what your want during your lifetime, and to leave the maximum amount possible to your heirs. See one. IMHO it will be money well-spent.

Regards…..Pixy
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