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Since you asked about “paperwork issues” you will get a 1099 for the withdrawal that has to be put on your tax forms, but it is coded in some way that it gets backed out of your income. (Sorry I can’t explain it better...I use a PC tax program and I just know it works out okay in the end).
No really other than making sure your distributions are marked as normal and not premature
Quote:
Originally Posted by Okey Dokie
Since you asked about “paperwork issues” you will get a 1099 for the withdrawal that has to be put on your tax forms, but it is coded in some way that it gets backed out of your income. (Sorry I can’t explain it better...I use a PC tax program and I just know it works out okay in the end).
Thanks.
Quote:
Originally Posted by rjm1cc
Since the growth of your ROTH investments is not taxed and the growth in your taxable account is why would you switch.
Sees that the last place to take money from would be the ROTH account. The downside is trading losses in a ROTH are of no benefit.
At this point (actually starting a few years ago), I have thoroughly exhausted my supply of "losses" from the trading account - it would take a major crash of any of those stocks to cause a loss. Anything I withdraw from a few years ago - going forward is a gain.
Instead of having more of these gains taxed at this time, I prefer to live out of the ROTH (at a zero tax rate) while I also convert as many dollars from my IRA to my ROTH as possible. I will limit those withdraws to the maximum I can convert - also with no effective tax due. This way I can basically get as much of my Traditional IRA cash out of that account before I turn 70 and must start making taxed withdrawals.
My calculations show that:
taking living expenses from the Roth will leave more taxable money in the trade account.
taking living expenses from the Trade will leave more taxable money in the IRA account.
It is pretty much a push and just a matter of which account do I want to have grow. My inclination is to not let the IRA grow more. This is because future actions of congress are unknown and a regular taxable account is less likely (?) to be affected by political actions.
Last edited by blktoptrvl; 05-03-2019 at 10:52 AM..
Location: Was Midvalley Oregon; Now Eastside Seattle area
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^have you thought about the possible consequences, if the Market declines ( It's easy for Market increases) after the IRA->Roth conversion? How would you invest in the Roth? or in taxable?
Since the cost to convert to Roth or taking taxable IRA distribution is the same, would taking a blended approach be beneficial? Sequence of events and a sequence of risks become more important in retirement. I haven't solved the problem either.
Instead of having more of these gains taxed at this time, I prefer to live out of the ROTH (at a zero tax rate) while I also convert as many dollars from my IRA to my ROTH as possible. I will limit those withdraws to the maximum I can convert - also with no effective tax due. This way I can basically get as much of my Traditional IRA cash out of that account before I turn 70 and must start making taxed withdrawals.
Seems like you would just be running in circles... taking money out of Roth to live on so you can do Roth conversions? Why not just use the money you are planning to convert as a withdrawal to use for living expenses? If you need more for living expenses then take some out of the Roth account as well.
^have you thought about the possible consequences, if the Market declines ( It's easy for Market increases) after the IRA->Roth conversion? How would you invest in the Roth? or in taxable?
Since the cost to convert to Roth or taking taxable IRA distribution is the same, would taking a blended approach be beneficial? Sequence of events and a sequence of risks become more important in retirement. I haven't solved the problem either.
If I follow you correctly - I am not sure if I do...
You are asking; how will I be able to invest in the Roth or the Traditional if the market goes down? I am not sure why this is being asked. I cannot invest in either no matter if the market goes up or down - except with reinvested dividends; as at this point in my life I contribute to neither - and do not expect to for the rest of my life. When I turn 62, I will begin living on SS and stop all (or almost all) withdrawals from other accounts and still will have nothing to invest.
A blended approach - again according to my calculations results in no difference. If I were not converting from the IRA, then, yes, that blended approach could potentially save on some taxes, but the fact that I am shoving money from the IRA to the Roth makes it a moot point.
Last edited by blktoptrvl; 05-03-2019 at 11:30 AM..
Seems like you would just be running in circles... taking money out of Roth to live on so you can do Roth conversions? Why not just use the money you are planning to convert as a withdrawal to use for living expenses? If you need more for living expenses then take some out of the Roth account as well.
For the most part, this would be true, except...
I live on less than I convert - so conversion still gets more money into my ROTH.
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,073 posts, read 7,511,991 times
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Posts 9, 8
^ not investing new monies but converting existing IRA to Roth vs existing IRA to taxable account. A slightly different question as Hikernut but along the same idea. The extension the Hikernut, is what happens if the subsequent Roth declines in value and how would the Roth invested?
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