Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Assume that when I retire I'll be living off pensions, SS, savings, etc. That said, I'll have about $1.1 million in my company's 401 K plan.
Question - My intention is to basically turn that over to my daughter so she can roll it over into an IRA, Roth, her company 401K (is that possible even). The main question - would taxes be paid on it when its turned over to her or can she roll it over with out paying taxes. It would stink to think that I'd turn that over and she'd be hit with crazy taxes.
you CAN NOT turn it over to her but you can make her the beneficiary after your gone ... she then gets to have to take withdrawls over her lifetime as computed by the irs and pay taxes on smaller amounts a little at a time.
you could convert to a roth , pay the taxes and then let her inherit it tax free... thats what i would do. she then can draw off it tax free for a lifetime according to irs tables (best choice ) or clean it all out over a 5 year period.
you could take some out yourself each year, pay the taxes and give her a gift , but its far more powerful to convert to a roth first and let her grow money tax free over her lifetime
as im learning in ed slotts books life insurance can be an amazing tool. take some of the money our of the ira you dont need , pay the tax, buy a life insurance policy on yourself with your daughter as owner to cover the taxes on the ira if your daughter inheirited it. bingo taxes paid and she gets to take the money out of the ira
no she can not roll any traditional ira into a 401k... if she had money from a previous 401k she took possesion of then it normally is rolled over in to a special type of account called a roll over ira which is kept seperate from all your other iras.. that can be rolled over to a company plan ..
im no expert on this stuff but at least i had some answeres for you... of course you know correct answeres will cost you a lot more ha ha ha
Last edited by mathjak107; 11-02-2009 at 03:16 AM..
Because hawkster's a good mom/dad. Just for your own info, hawkster, you and your spouse are allowed to give gifts tax free of up to--what is it, mathjack, $12,000 each per year for as many years as you and your wife/husband live. That's a total of $24,000/yr tax free, which can add up to a lot of bread over your lifetimes.
a couple is 26,000 now for 2009. want to really make her rich : if you got some extra dough take some of that nice taxable ira money that your daughter will have to pay taxes on anyway if she inherits it and buy a spl life insurance policy with you as the insured and your daughter as owner and beneficiary . you give her the money as a gift to pay the premium.
bingo you are taking taxable money and leveraging the amount of the premium into many more times that of tax free money for her... no better way of taking taxable money and changing it into tax free leveraged money then life insurance...
heres another thought,,, if you were going to leave your wife as beneficiary of your ira then dont. all your giving her is a taxable pile of money with required distributions that keep the pile from really gaining much tax defered anymore anyway ...why not buy a life insurance policy for the same amount , she would have to spend more then the premium on taxes alone and the death benefit is more then odds say you will pay in. . she gets the same amount as the ira was 100% tax free now with no rmd's and you make your kids the beneficiary on the ira. you can even set it up so your grand children can be beneficiaries. nothing beats making your partner uncle same wait maybe 150 years for all his taxes that your wife would have had to pay over the next few years based on the irs chart for her age..
they get their lifetime to take small withdrawls and pay a little tax to the irs , it can be 50 or 80 years those taxes can be streched out with your kids, we havent even brought grand children into the picture yet, when you do maybe your uncle sam will get his due 150 years from now... your wife would have had to pay tons of taxes on the other hand from the high rmd's.
again this is not investment advice but food for thought. run your own numbers
Last edited by mathjak107; 11-03-2009 at 03:15 AM..
i happened to catch ed slott the retirement master on a pbs special. usually these guys are a dime a dozen but ed peaked my attention. he was not talking about savings or asset allocation or buy a real estate empire with no money . he was talking about an area i knew little about . it was a world i never knew existed,.. i always figured we just paid taxes on our retirement money or used roths but basically what it is, it is, and we pay... but ed had other ideas.
we should think of getting our retirement funding in order like a football game.
the accumulation stage is when we are saving and investing and getting things to grow. thats the first 1/2 of the game.
most financial advisors in my opinion are good at the first 1/2 of the game. they can tell you what to buy, how to allocate assets , etc. this is pretty much everyone i know in my financial life but they are very poor at the 2nd half of the game which is the withdrawing of all this money and most important keeping it out of your partner uncle sams hand. you see the irs is very good at playing all 4 quarters of the game and while you may win the 1st 2 quarters most of us loose the game in the 2nd half. the irs knows we all think that the game is played by us either converting to roths and they get their taxes now or on your regular retirement money when the rmd's kick in.
it reminds me of how we negotiate to the end when we buy a car, we squeeze every last penny out of the dealer. then go and trade the car back to the dealer when we get a new one and take not only the wholesale price but any wholesale price they give us....
there are many ways to preserve your hard earned money and all are right before your eyes. we arent talking magic tax shelters or bogus drilling ploys... we are talking products and instruments that have always been used but used for other purposes like life insurance.
the thought of creating and transfering tax free wealth using a product which once our house was paid for and the kids are on their own we didnt even think we needed anymore was amazing.
there are lots of ways you can get your limited savings or your vast empire to get more bang for the buck, you just have to find the experts in playing the 2nd half of the game not the 1st half.
for starters i highly recommend reading ed slotts books , they are execellent starting points.....
i know ,maybe i should do info-mercials when i retire ha ha ha
Last edited by mathjak107; 11-03-2009 at 03:47 AM..
i just thought of a few weeks when for the first time ever i sat down with the 401k representives from the people who hold our 401k money..
i ran my retirement plans past them and mentioned since im younger then 59-1/2 i would be hitting the 401k money first.. i wanted to dwindle that down befor social security kicked in and i was still in a lower bracket.
id be reducing my rmds for later on by spending it first.
they were besides themselves with my plan , they said you never spend tax defered money before taxible money.
i said but why would i want to spend the taxable stuff ? if i have my stock funds in the taxable and we die the kids get a stepped up basis and get all those gains tax free, not defered but free. i shoild be saving the taxable account for last .... they both looked at each other and said they have to re-examine their ideology and get back to me......
thats what i mean about getting the right people for the 2nd half
My parents struggled all their lives. My dad died with $70 in his pocket, thats it. I'm trying to be financially responsible with my money, which my wife and myself are teaching our daugter as well. That said, my intention is to leave her the money because quite honestly, while money does not buy happiness, it certainly makes life a heck of a lot easier. In addition, If my daughter takes the money and allows it to grow and takes out little, and passes it on to her kids, her kids kids do the same....well you get the idea. It's no secret that across several generations the power of compunding interest is just that...powerful.
Now that said, looks like I'll have to look up ed slotts and get his book to get into. Sounds like I have a lot more to think about.
I'll look further into this and I honestly never thought of rolling it over to a Roth but it sounds good.
So....if I had a $1,000,000 at retirement how much would I loose from it if I rolled it over to an Roth IRA? Good point about rolling over to a Roth, never thought of that
well its all based on your own tax bracket as well as your state.
the biggest bang for the buck is convert way before retirement. you want all those years ahead of you to rack up all those juicy gains tax free. im retiring in 1 1/2 years but the money im converting is still my long term stock funds. thats money for eating in 20 years...
for me the conversion will pull about 25-30% in taxes.. as a special 1 year only deal next year the irs will let you convert but not pay taxes next year. you can declare 1/2 in 2011 and 1/2 in 2012.
i plan on just converting my growthy stock funds to a roth being i have no intentions of hitting that money for decades . the bond funds ill leave in my traditional ira being ill probley use that in 7-10 years and the interest wont creat as much growth . im not sure i would get enough bang for the buck to convert those....
it takes lots of figuring and numbers crunching too. dont forget you can have stock in your taxable account too, that stock is subject to only 15% capital gains , special dividend rates and best of all your kids can inherit that stock no matter how much it appreciates tax free .... its not easy to figure out which is better, spend full income rates to buy those funds in your ira and convert to a roth or not spend the money and leave them where they are in the taxable account.
im still boggled here what to do.
Last edited by mathjak107; 11-03-2009 at 05:19 PM..
Because hawkster's a good mom/dad. Just for your own info, hawkster, you and your spouse are allowed to give gifts tax free of up to--what is it, mathjack, $12,000 each per year for as many years as you and your wife/husband live. That's a total of $24,000/yr tax free, which can add up to a lot of bread over your lifetimes.
Giving money to your children makes you a good parent? Does this mean that working-class parents are crummy parents?
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
