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My wife and I have had to start taking RMD's which means we are 71 years of age. At this time we do not need the money so we are putting it back into the same Mutual Funds (our IRA Mutual Funds), just not as an IRA. I like the funds we have so this is why I keep investing in them.
Could I declare these as ROTH Accounts and why would I?
Also open to other investment uses of the RMD money but please, nothing that has anything to do with insurance companies.
My wife and I have had to start taking RMD's which means we are 71 years of age. At this time we do not need the money so we are putting it back into the same Mutual Funds (our IRA Mutual Funds), just not as an IRA. I like the funds we have so this is why I keep investing in them.
Could I declare these as ROTH Accounts and why would I?
Also open to other investment uses of the RMD money but please, nothing that has anything to do with insurance companies.
Thanks.
Congrats on your situation. It is one many of us hope to be in when we reach the RMD age. You are there are there and I know it is a good feeling.
No, you can't convert RMD's to a Roth IRA. You can make additional withdrawals and convert them to a Roth IRA. You don't have to sell and buy the same security, just have your custodian move them to the new account. Do make note of the value on the conversion date as that will be the income you'll need to add for taxes.
Why would you do this? To shelter future withdrawals from taxes, to reduce your RMD's, and to utilize any remaining amount in your tax bracket. The disadvantage is you're paying taxes now instead of later. If at some point, RMD's will kick you into a higher tax bracket, this becomes an advantage.
For those not yet 70-1/2 and retired, it may be to your advantage to convert your traditional IRA to a Roth IRA, as all of the withdrawals can be converted. Again, it depends on your tax situation now and in the future. For instance, after I retire, we'll be in the 15% tax bracket. At some point, RMD's will push us into the 25% tax bracket, so it will be to our advantage to take additional withdrawals and convert them to a Roth. If we're lucky, we'll convert enough so RMD's will be at a level that keeps us in the 15% bracket. Plus, we'll be able to manage taxable income with Roth withdrawals.
The disadvantage is you're paying taxes now instead of later. If at some point, RMD's will kick you into a higher tax bracket, this becomes an advantage.
True, but if don't need the RMD money you could use it to pay the taxes on a conversion to a Roth.
No, you can't convert RMD's to a Roth IRA. You can make additional withdrawals and convert them to a Roth IRA. You don't have to sell and buy the same security, just have your custodian move them to the new account. Do make note of the value on the conversion date as that will be the income you'll need to add for taxes.
Why would you do this? To shelter future withdrawals from taxes, to reduce your RMD's, and to utilize any remaining amount in your tax bracket. The disadvantage is you're paying taxes now instead of later. If at some point, RMD's will kick you into a higher tax bracket, this becomes an advantage.
For those not yet 70-1/2 and retired, it may be to your advantage to convert your traditional IRA to a Roth IRA, as all of the withdrawals can be converted. Again, it depends on your tax situation now and in the future. For instance, after I retire, we'll be in the 15% tax bracket. At some point, RMD's will push us into the 25% tax bracket, so it will be to our advantage to take additional withdrawals and convert them to a Roth. If we're lucky, we'll convert enough so RMD's will be at a level that keeps us in the 15% bracket. Plus, we'll be able to manage taxable income with Roth withdrawals.
Thanks for the information. Clear and concise.
I was taught to avoid (not evade) paying taxes until one has to pay as one never knows what will change. I still adhere to this principle......LOL
I was taught to avoid (not evade) paying taxes until one has to pay as one never knows what will change. I still adhere to this principle......LOL
So do I. It's a fine balance if you're close to a bracket change. I'm hoping to pay the 15% now and avoid the 25% later under RMD's. Since Congress is worse than a drunken sailor, I have little hope for taxes going down. Up is the more likely direction in the future.
So do I. It's a fine balance if you're close to a bracket change. I'm hoping to pay the 15% now and avoid the 25% later under RMD's. Since Congress is worse than a drunken sailor, I have little hope for taxes going down. Up is the more likely direction in the future.
I think part of the advice was meant to say the less money you have , the more you need to keep all of it so pay none of it in taxes unless required to also the more money you make, the easier it is to pay some of it out even if not required.
I have often said it is real easy to avoid paying taxes. Make no money!!!! Otherwise, be thankful for your taxing issues.
I will worry about bracket creep when I get there.
I will add only this. Only earned income (a job) may be sheltered in a IRA, whether traditional, or Roth. This is why the OP can't do it.
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