Roth conversions anyone done this?

[SD51555]

My 401k contributions are 100% roth. When I leave my current job and go to the next one, I will put together a budget right away and convert it as fast as I can, so long as I'm not pushing myself into a higher bracket. I may be the only one on earth planning to move from a low tax state to a high tax state in retirement. When I step into that high tax state, I don't want to be carrying any deferred tax liability. I'm also counting on real estate to be cheaper because it's a blue state where all the old farts are dumping property and headed for the sun belt.

 

[rocksnstumps]

^^^^It's a complicated world out there for retirement planning. Some states tax social security benefits, most don't. Some states don't tax retirement pensions but most do. A lot have exceptions for certain groups too. My state taxes a pension from a megacorp but if yours is a military pension from Uncle Sam, no tax. The biggest hurdle for folks trying to maybe retire a bit early is the insurance hurdle before 65. The whole ACA insurance topic makes many discussions on forums and chat boards. Too high an income and no credits to offset costs. Too low and you can't qualify and get bumped into the medicaid group which has many less players offering coverage and blah, blah, blah. To be blunt, insurance costs will cream you compared to state income tax if you are trying to pull the plug before 65 unless you play the game as rigged as best you can.

 

[Buckly]

I think the days of Roth IRAs are going to come to and end in the not too distant future. I’ve Seen some talk about this and/or severely limiting contributions. The Government simply doesn’t like them as they see so much revenue off the table for tax collection. I use Roth‘s right now for speculative growth. Biotech companies that aren’t worth much now but, have potential to grow hundreds or thousands of percentage over the next 10-15 years. I certainly don’t want to pay tax on that! I’m positive the Government is not happy with all that profit non taxed.
As far as retiring in a blue State, you still have to live by rules and ideas you’re not comfortable with. That and 6 month winters. Sometimes you just don’t want to be there if you know what I mean. All part of figuring.it out. Real estate is cheaper but, it’s still sky high. Where I’m at in some areas there is zero availability. Nothing for sale, or that would interest me anyways. I look all the time at real estate and down South looking at trade same for same is about 25-100k difference for what I’m looking at. Weigh that with warm weather, lower taxes and a more comfortable political climate and it’s all in the process of what’s right or not.

 

[Buckly]

My 401k contributions are 100% roth. When I leave my current job and go to the next one, I will put together a budget right away and convert it as fast as I can, so long as I'm not pushing myself into a higher bracket. I may be the only one on earth planning to move from a low tax state to a high tax state in retirement. When I step into that high tax state, I don't want to be carrying any deferred tax liability. I'm also counting on real estate to be cheaper because it's a blue state where all the old farts are dumping property and headed for the sun belt.

I believe Roth withdrawls are State income taxable in a lot of these blue States. 8+ % In NY .

 

[Telemark]

I’m taking the hit now and maxing out the Roth 401k.

I think if you are maxing out your contributions, you should do Roth, as it would effectively be a lower contribution if you go pre-tax. (30k per year, or something like that)

 

[AtomApple]

My 401k contributions are 100% roth. When I leave my current job and go to the next one, I will put together a budget right away and convert it as fast as I can, so long as I'm not pushing myself into a higher bracket. I may be the only one on earth planning to move from a low tax state to a high tax state in retirement. When I step into that high tax state, I don't want to be carrying any deferred tax liability. I'm also counting on real estate to be cheaper because it's a blue state where all the old farts are dumping property and headed for the sun belt.

Are you only contributing 6k a year?

question? If a wife is “stay at home” can you contribute 12k a year, since you file jointly?

 

[b116757]

401k max amount per individual is $22,500 for 2023

IRA 2023 max is $6,500 if under 50 and $7,500 for those over 50 per person you guys I think can contribute $6,500 in each of your accounts.

For those under 18 of age they can only contribute up to any actual income they have had up to that $6,500 limit

My oldest boy when he was 17 made $3,300 working fast food he opened an IRA and deposited all $3,300 that year. That rule about actual income for kids keeps well off families from opening IRA’s for baby’s

 

[Foggy47]

I converted about 1/2 of my wife's and my IRA money into Roth about 20 years ago. The tax was considerable and painful at the time.....but now I wish I had done more. Now we take RMD from the remaining regular IRA while letting our Roth money accumulate tax free.

The good part about a Roth (if you do not need the money to live on).......you pass that money tax-free to your heirs.....and it can further grow for them....or pass it along tax-free yet again? (Until they change the law anyway).

 

[Foggy47]

My 401k contributions are 100% roth. When I leave my current job and go to the next one, I will put together a budget right away and convert it as fast as I can, so long as I'm not pushing myself into a higher bracket. I may be the only one on earth planning to move from a low tax state to a high tax state in retirement. When I step into that high tax state, I don't want to be carrying any deferred tax liability. I'm also counting on real estate to be cheaper because it's a blue state where all the old farts are dumping property and headed for the sun belt.

You certainly like to swim upstream SD. lol. Hope it works for you.

 

[Foggy47]

Are you only contributing 6k a year?

question? If a wife is “stay at home” can you contribute 12k a year, since you file jointly?

You can only contribute "earned income" IIRC. So...she would have to pull in wages in order to contribute.

 

[b116757]

You can only contribute "earned income" IIRC. So...she would have to pull in wages in order to contribute.

I do not believe that to be the case a non working spouse can still contribute to an IRA a child has to have earned income.

 

[AtomApple]

I do not believe that to be the case a non working spouse can still contribute to an IRA a child has to have earned income.

View attachment 59505

Nice! I figured it should make sense.
I do $3 an hour through my employment program to Roth, but I’d never taken a penalty for the extra $$ generated from OT.
I just figured my administrator rolled it to my traditional or the limit was higher.

and to the earlier post about doing nothing if you don’t know what you are doing, I hope that was a joke. Either Trad or Roth is better than nothing. I’m in my mid 40s and I wish I’d done more earlier. I was frugal though, and my house will be paid off before I’m 50, so that’s still an investment win imo.

 

[b116757]

Yes an employment 401k max is nearly triple that of an IRA it doesn’t matter if it’s Roth or tradition it’s the max amount of any combination. I maxed mine out for years until last year when we bought another farm now I only put in enough to get the company match and the rest goes toward the new farm. 401K’s have a couple advantages over IRA’s I would never roll a 401K into a IRA unless I was over the age of 59.5 because 401k also have the advantage of being drawn on earlier than a IRA without penalty under curtain conditions. Now I will say if my employer had my 401k through Edward Jones or some similar clown show I would roll it out of that account into an IRA someplace else at the first opportunity.

 

[Buckly]

In a 401K you can start no penalty wiithdrawals at age 55 if you’re retired. So if you want to retire pretty early that’s an advantage. Downsides to a 401K and why you would want to rollover to IRA’s are that 401s usually have much higher fees and youre limited to what you can invest in. In an IRA, the World is at your fingertips. So if you’re under 59 1/2 just do a partial rollover and keep a couple years of what you need in the 401 and get the bulk of the money out and into an IRA.

 

[Foggy47]

I do not believe that to be the case a non working spouse can still contribute to an IRA a child has to have earned income.

View attachment 59505

^ I did not know this. My bad. Probably why going by what is told to us on a forum is often bad advice. lol. Things sure have changed over time.

(your attachment does not clarify if it's each or per couple....but I assume that it is each? Not sure how you would do a split in the contributions.)

 

[Brian662]

I do not believe that to be the case a non working spouse can still contribute to an IRA a child has to have earned income.

View attachment 59505

If you have a LLC you can pay minors (children) up to $6,500/year and put it directly into an IRA for them.

 

[AtomApple]

If you have a LLC you can pay minors (children) up to $6,500/year and put it directly into an IRA for them.

Good idea, does it have to be 6,500 gross or net?

 

[b116757]

If you have a LLC you can pay minors (children) up to $6,500/year and put it directly into an IRA for them.

That I didn’t know good info we have a couple different businesses one is an LLC. I may need to explore that a bit more for my kids I actually do work the shit out of them on occasion either farming or contruction on the rentals or farm buildings when repair/remodel work needs done.

 

[Brian662]

Hiring Your Kids to Work for You Can Result in Significant Tax Savings.

Do you have your teenage kids helping you at the office? If so, you might want to consider putting them on payroll and save on taxes

www.oberlanderandco.com

 

[AtomApple]

Hiring Your Kids to Work for You Can Result in Significant Tax Savings.

Do you have your teenage kids helping you at the office? If so, you might want to consider putting them on payroll and save on taxes

www.oberlanderandco.com

I saw a clip yesterday that said you can pay a minor up to 12,500 tax free.
odd that that popped up on my Instagram feed after being on this thread…