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I'm 66. with the value down and tax's at 12%. Would not this be a good time to move a chunk of money to my Roth.
I'm thinking sell S&P 500 and move to my Roth S&P 500. Other then the tax, it would be a straight switch.
So I would sell $30000 S&P and buy $30000 S&P the next day. ? is this a wash sale.
No it is not a wash sale as you would sell it within the IRA. You will be taxed on $30k of ordinary income.
You can probably just transfer the funds without selling, although you will still be taxed at the value of the funds at the time of transfer. Fidelity allows that and I am sure other brokerages do also. Saves a step and is almost immediate.
you would not sell but just transfer . it could be an irrelevant move though ... there is no inherent benefit converting just because prices are lower . you may be just prepaying taxes on money that could be invested .
don't forget 5k in a roth with after tax dollars is 6666.00 in a traditional .
assuming a 25% marginal bracket if the roth doubles you have 10k ..
if the traditional doubles it is 13,332.00 which after tax is the same 10k
Agreed, it is just a transfer between accounts in your bank, no selling involved. Taxes have to be paid though, best to use funds from outside of the ones you transfer, ie., cash already in one of your after tax accounts, rather than money from the accounts you transfer.
I did just this last week figuring that the tax brackets are lower now but will rise years from now & my income will increase a bit in the future when I start collecting SS so there's a possibility of a tax hedge here... if I live long enough. Also you're transferring more shares per $ now than earlier in the year because of the recent market correction.
If you want to do it this year I think you will have to call your broker and see if they can transfer the stock today.
If you sell and buy I think the transaction maybe a next year items so check your broker.
Agreed, it is just a transfer between accounts in your bank, no selling involved. Taxes have to be paid though, best to use funds from outside of the ones you transfer, ie., cash already in one of your after tax accounts, rather than money from the accounts you transfer.
I did just this last week figuring that the tax brackets are lower now but will rise years from now & my income will increase a bit in the future when I start collecting SS so there's a possibility of a tax hedge here... if I live long enough. Also you're transferring more shares per $ now than earlier in the year because of the recent market correction.
the transfer at lower prices is really a wash . how many shares you move is irrelevant . just think of a stock split . how many shares the dollars are made up of does not matter , you are converting dollars .
if you have 100k in the roth and want to convert 50k it is still 50k going in the roth and 50k staying behind regardless of price .
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Last edited by mathjak107; 12-31-2018 at 10:36 AM..
the transfer at lower prices is really a wash . .....
I'm thinking a few years ahead when I start claiming SS & have to take RMDs from the tIRA & the combination of the 2 may push my SS over into the 85% tax range, & then as the years pass the RMD % gets higher. The Roth funds could hedge against that.
absolutely ... roths have advantages other then just higher or lower brackets since so much is linked to taxable income .
but the point was that converting offers no advantage when prices are lower .... if prices were higher and you converted maybe you had 150k , so you would convert 75k and leave 75k behind . either way nothing changes advantage wise
I'm thinking a few years ahead when I start claiming SS & have to take RMDs from the tIRA & the combination of the 2 may push my SS over into the 85% tax range, & then as the years pass the RMD % gets higher. The Roth funds could hedge against that.
If you move $30K from your IRA to a Roth, your tax today at 12% would be $3,600 (assuming that $30K does not push you into a higher bracket). If you leave that in your IRA, let's assume it will grow to $37K in 4 years. That $37K will require an RMD of about $1,350 at age 70 1/2. Is that amount then enough to concern you for the $3,600 bite you will take today?
I'm 66. with the value down and tax's at 12%. Would not this be a good time to move a chunk of money to my Roth.
I'm thinking sell S&P 500 and move to my Roth S&P 500. Other then the tax, it would be a straight switch.
So I would sell $30000 S&P and buy $30000 S&P the next day. ? is this a wash sale.
If it's all in the 12% bracket, why not? It won't bump your income up enough to increase your Medicare premium. The only consideration is the Social Security tax torpedo with 50% and 85% of your Social Security check taxable.
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