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Old 05-23-2014, 09:18 AM
 
Location: Central Massachusetts
4,800 posts, read 4,842,106 times
Reputation: 6377

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mathjak's favorite financial advisor/planner Ed Slott (he is very popular with a number of people) has a new article out. Ed Slott Analyzes EBRI Study: Roth IRAs Growing TWICE as Fast as Traditional IRAs ~ Ed Slott and Company – IRA, Tax, Retirement Planning Articles, Insight.

I bring this out because what his says is very important to a lot of people here. So many follow his advice and teachings that he can actually shape events. The case in point her is recent changes as the article points out make it easy and even profitable to do Roth conversions on your traditional IRA. In the article it talks about that there is an increase in the amount of money in Roth now that wasn't there before. To me that is a "der" point. Of course since more and more people are using new laws to maximize retirement savings and avoid taxes as much as possible. I do not have a lot in Roth IRA or even in IRA. Much of my retirement savings is in 401k as most of you know is employer sponsored. In my household that is where I was able to put money away. Trying to get additional money to fund an IRA or even a Roth IRA was next to impossible. We are not the only people that would struggle with additional savings outside of employer sponsored programs. Most investment professionals will tell you that if your company offers that then by all means take advantage of it. What better way to make 100% interest on 5% of your pay if that is the match.

I just had to bring this out. Thanks mathjak for the Ed Slott recommendations. He is very good and his strategies are very sound.
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Old 05-23-2014, 09:35 AM
 
29,764 posts, read 34,848,700 times
Reputation: 11675
The transition into retirement involves a very important change. No longer will you be saving new money tax free with a few exceptions. Taxable accounts will become your primary vehicle. If you have not had them for investments previously it might be good planning food.
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Old 05-23-2014, 11:02 AM
 
Location: Great State of Texas
86,093 posts, read 72,460,873 times
Reputation: 27565
I've opened a Roth now that I'm retired but doing sub teaching.
I put all my income in the Roth and get to write it off my taxes.
If I need it I can take the principal out with no worries and in 5 years the income generated.

A Roth is much better post retirement for me because I'm just using it to defer taxes on my slush fund income I get from teaching.
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Old 05-23-2014, 11:29 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,522 posts, read 39,903,732 times
Reputation: 23629
Quote:
Originally Posted by golfingduo View Post
... ... I do not have a lot in Roth IRA or even in IRA. Much of my retirement savings is in 401k ,,.
as we all know and have been seriously reprimanded... not all our Ed Slott supporters are keen on Roth IRAs

I like them and also use a ROTH 401k.

AFTER my last kid was over age 26 (liability exposure even tho they had been independent since age 18) I rolled my 401k $ into a Self directed IRA, then take chunks from that and roll to ROTHs on yrs my taxes are under 5%. I bump my rollovers to pay no more than 5% tax now.

But, I will get my ears boxed for mentioning this, as for many it makes no sense paying ANY tax now, when you can defer taxes till later. They have a valid point. It makes more sense to pay with deflated dollars (tax rate being equal or near)
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Old 05-23-2014, 11:57 AM
 
14,252 posts, read 23,969,886 times
Reputation: 20025
Quote:
Originally Posted by HappyTexan View Post
I've opened a Roth now that I'm retired but doing sub teaching.
I put all my income in the Roth and get to write it off my taxes.
If I need it I can take the principal out with no worries and in 5 years the income generated.

A Roth is much better post retirement for me because I'm just using it to defer taxes on my slush fund income I get from teaching.

Funding a ROTH IRA does NOT reduce your adjusted gross income; funding a TRADITIONAL IRA does.

IRA Basics
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Old 05-23-2014, 12:16 PM
 
Location: Wisconsin
21,534 posts, read 43,962,244 times
Reputation: 15132
Quote:
Originally Posted by HappyTexan View Post
I've opened a Roth now that I'm retired but doing sub teaching.
I put all my income in the Roth and get to write it off my taxes.
- Roth deposits CANNOT be deducted from your income. You need a Traditional Tax-Deferred IRA for that and can only contribute up to age 70-1/2.

Roth deposits are made from TAXABLE earned income, but earn TAX-FREE, do not require RMDs, and don't have an age limitation on deposits, annual maximum contribution $6,500 (over age 50).

- BUT you definitely should be paying income taxes on those Roth IRA deposits.

If you are, in fact, deducting your Roth deposits from your income, let's hope you aren't audited by IRS.

There is no free lunch on this money.

The IRS always gets its money - either now when you deposit to the Roth - or later, when you take required minimum distributions from a traditional IRA at age 70-1/2.

Quote:
Originally Posted by jlawrence01 View Post
Funding a ROTH IRA does NOT reduce your adjusted gross income; funding a TRADITIONAL IRA does.

IRA Basics
You betcha'.
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Old 05-23-2014, 01:13 PM
 
Location: SoCal desert
8,093 posts, read 13,223,984 times
Reputation: 14870
So - if more people are paying the taxes now and putting their retirement money into Roths ...

What are the Feds gonna do in 25-40 years when these people start taking the money out tax-free?

The Feds sure as heck aren't saving todays' tax money for slow times

Not being snarky - have wondered this for awhile.
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Old 05-23-2014, 01:19 PM
 
Location: Great State of Texas
86,093 posts, read 72,460,873 times
Reputation: 27565
Quote:
Originally Posted by HappyTexan View Post
I've opened a Roth now that I'm retired but doing sub teaching.
I put all my income in the Roth and get to write it off my taxes.
If I need it I can take the principal out with no worries and in 5 years the income generated.

A Roth is much better post retirement for me because I'm just using it to defer taxes on my slush fund income I get from teaching.
I totally screwed this up

I put the income in a Roth, yes but didn't write it off my taxes.
This was done to generate future tax free profits while allowing me penalty free access to the principal.
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Old 05-23-2014, 01:20 PM
 
Location: Great State of Texas
86,093 posts, read 72,460,873 times
Reputation: 27565
Quote:
Originally Posted by Gandalara View Post
So - if more people are paying the taxes now and putting their retirement money into Roths ...

What are the Feds gonna do in 25-40 years when these people start taking the money out tax-free?

The Feds sure as heck aren't saving todays' tax money for slow times

Not being snarky - have wondered this for awhile.
401K is tax deferred money that the Fed never got for decades.

In all cases though the government has put a limit on what you can contribute annually.
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Old 05-23-2014, 01:29 PM
 
Location: Wisconsin
21,534 posts, read 43,962,244 times
Reputation: 15132
Quote:
Originally Posted by Gandalara View Post
So - if more people are paying the taxes now and putting their retirement money into Roths ...

What are the Feds gonna do in 25-40 years when these people start taking the money out tax-free?

The Feds sure as heck aren't saving todays' tax money for slow times

Not being snarky - have wondered this for awhile.
You aren't alone. There are people who believe eventually the govt will find those huge Roth deposits too tempting and will find a way to attempt to tax them. Lots of retirees with six figure retirement incomes plus very large retirement accounts. Income and means testing social security benefit payments for starters is one I've heard.
Sooner or later the govt may at least try.
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