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If her income is too high, she can't even open one to start. She would have to get a low paying job after retirement, unless this years income is low enough, just to open one.
If I understand correctly I don't think they have savings. It sounds like they were planning on working until they qualified for ss and pension. Am I correct op, sorry if I misunderstand, not sure....
edit: wait, you said you have 401k
I'm surprised there is age discrimination at 59 years old? 70 maybe but 59? I thought 60 was the new 40.
No, 60 is not the new 40 in today's workforce. Companies can higher fresh-faced college grads and start them at lower salaries, plus, they view 50 and uppers as nearing retirement age and therefore they don't view them as ambitious enough.
Age discrimination is alive and well. Sadly. There are many folks in their 50's who plan on working for many more years.
I don't have enough saved to pay the taxes with on converting a trad or rollover IRA. I need the money to live on to reach my FRA. I made way too much money to qualify for a Roth.
None of what you said is incorrect. You are correct that she is eligible to convert. Trouble is converting is a taxable event. In that event she will pay taxes on every penny she converts. It is advisable to pay the taxes with money not associated with the converted monies. If there is none to do that with it will be less advantageous. As it is she is better off using her funds to live on as is. Wait until FRA or higher depending on her assets to file for SS. She needs to file for Medicare at age 65. Her next highest priority is to get affordable health insurance she can live with. She will need to consider self insure on LTC or find a way to get that if possible. If she self insures it would be advisable to convert her stock holdings to a near liquid cash state. This should be to the tune of about 250k to 305k.
If her income is too high, she can't even open one to start. She would have to get a low paying job after retirement, unless this years income is low enough, just to open one.
The income limits are for making direct contributions, not for conversions. (At one time there were income limits to do a conversion, but that changed in 2010.)
The current custodian will convert tax-deferred monies to a Roth. A new custodian will open a Roth for the purpose of receiving converted monies.
Please read AGAIN. If you made/make too much money you can't even OPEN a Roth to begin with. Therefore there is no Roth to roll over in to. I didn't think I Had to spell it out.
While it makes sense to always use funds at hand to pay the taxes, if there is a large tax rate discrepancy between now and during retirement, which is what it appears it would be for her, then IF she opened a Roth, it would always make sense to convert, regardless of where the funds come from. Taxes WILL have to be paid, and the amount that can be converted is relatively small per year overall, but after 6 years it could easily be say, $100-150k. If she converts just enough to stay in the zero bracket, then it is a taxable event but taxes would still be zero vs paying 25% effective of tIRA withdrawals after her pension and SS defacto force her to that tax rate for life, then she is saving $25 to 37k in taxes over all, but that must be weighed against the loss of subsidies gained because of techically having no income. It still makes sense to me, though, because I don't see her subsidies as that much. Even maximg out the 15% bracket to allow a higher amount of roller still yields a net gain of 10% of the rolled over amount in less taxes paid compared to the 25% bracket. Better to go in to retirement with the same spendable net amount in a Roth, than the same spendable amount after taxes in a tIRA. The Roth is significantly more flexible than the tIRA as it never affects income in case of use.
Last edited by Perryinva; 05-30-2016 at 06:56 AM..
I'm surprised there is age discrimination at 59 years old? 70 maybe but 59? I thought 60 was the new 40.
Quote:
Originally Posted by Eeko156
No, 60 is not the new 40 in today's workforce. Companies can higher fresh-faced college grads and start them at lower salaries, plus, they view 50 and uppers as nearing retirement age and therefore they don't view them as ambitious enough.
Age discrimination is alive and well. Sadly. There are many folks in their 50's who plan on working for many more years.
My former workplace has started to "get rid" of some employees in their late 40s with the very thinly disguised reason that they were "not vibrant", "not enthusiastic", "not active team members" . They had already gotten rid of many people in their mid 50s and most people who were older.
It is rare for them to hire someone who is not directly out of college. Even someone who is 26 with a couple years of experience is often considered "too old" to be a new hire.
It has caused some ridiculous situations like someone who has only one or two years on the job mentoring a new employee (you used to need to have ten years experience before you were assigned/asked to be a mentor).
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