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Author: jds47 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Splitting assets between IRA / Roth Date: 2/17/2014 1:45 PM
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Hello -

My wife and I are retired and have a mix of stocks and bonds. Mostly in index funds but some (about 10-15%) in individual stocks.

We both have IRAs/403B's and also Roths. We are moving money from IRAs into Roths every year and paying taxes on it.

I am trying to figure out what assets to put in Roths and what to put in IRAs. My thinking is that it would be better to put assets with higher expected appreciation (speculative stocks and stock funds) in the Roth which will never be taxed and put assets with lower expected appreciation (bonds and more conservative stocks) in the IRA where we need to take annual minimum distributions and pay taxes.

Any comments or thoughts?

Thanks -

John
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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 74283 of 75383
Subject: Re: Splitting assets between IRA / Roth Date: 2/17/2014 2:20 PM
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I am trying to figure out what assets to put in Roths and what to put in IRAs. My thinking is that it would be better to put assets with higher expected appreciation (speculative stocks and stock funds) in the Roth which will never be taxed and put assets with lower expected appreciation (bonds and more conservative stocks) in the IRA where we need to take annual minimum distributions and pay taxes.

Not a bad way to do it as that would likely result in a lower RMD requirement every year. Note, when you take your RMD, you can take it "in-kind" and have the IRA assets transfered out and into a taxable brokerage account. Those positions would now have a cost basis based on their value on the day of the transfer. You would still need to pay taxes on the amount but this would avoid any tranasction fees you might otherwise have.

You can also do this as you make your annual IRA to Roth conversions.

I am assuming that you do not need the income from either bucket of money so any lack of appreciation on the IRA (or losses on the Roth) would have limited impact on your financial needs. Good luck and don't forget that you can undo a conversion if you find out it puts you in a higher tax bracket OR if you are sitting on losses at the end of the year from the conversion.

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Author: jds47 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 74285 of 75383
Subject: Re: Splitting assets between IRA / Roth Date: 2/17/2014 4:15 PM
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Thanks for your quick reply.

Transaction costs are not much of an issue here. All my accounts are at Vanguard which gives me a bunch of free trades. Going in or out of Vanguard funds and ETFs does not count against that allowance. Further, I don't trade all that much - though my wife doesn't believe that. One great thing about being married is that at least one person will call you or your b---s---

John

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Author: spinning Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 74288 of 75383
Subject: Re: Splitting assets between IRA / Roth Date: 2/17/2014 5:13 PM
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I've been looking for a discussion about this question but haven't found much. I do what you suggest, more speculative assets with a chance for higher appreciation go in my Roth.

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 74291 of 75383
Subject: Re: Splitting assets between IRA / Roth Date: 2/18/2014 9:06 AM
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Rather than simply converting your TIRAs to Roths, make sure to fully fund the Roth IRAs annually.

403B plans often have high internal expenses.

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 74292 of 75383
Subject: Re: Splitting assets between IRA / Roth Date: 2/18/2014 9:59 AM
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Rather than simply converting your TIRAs to Roths, make sure to fully fund the Roth IRAs annually.

OP stated they were retired. They likely have no earned income to offset.

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 74293 of 75383
Subject: Re: Splitting assets between IRA / Roth Date: 2/18/2014 3:14 PM
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If you are no longer contributing to the 403B plans, why keep them?

Some 403B plans have decent guaranteed rates for fixed accounts, but for the most part 403 B plans have high annual costs compared to an IRA.

I like having assets with higher expected rates of return in Roth.

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