September 9, 2006 at 3:50 PM #7457CAwiremanParticipant
I wanted to know if anyone is familiar with Roth IRA’s. Do you need to get this through your employer, or can you get these through an investment firm?
Any real-life experience that you might share would be appreciated. Thanks.September 9, 2006 at 4:27 PM #34838
You set up a Roth IRA in the same way as a regular IRA, except you check the “Roth IRA” box. That means you won’t deduct your contribution from your taxable income. I don’t know any of the tax rules, but I’m sure you can get it all by “googling”. I can buy stocks in my IRA, and my neighbor bought real estate with hers (land via an investment firm). I bet you can do the same with your Roth IRA.September 9, 2006 at 10:36 PM #34854SD RealtorParticipant
Check to make sure that you qualify for a Roth IRA. If you do qualify for one make every effort to fund it. You can invest your Roth IRA funds in the same manner as your IRA, it just depends where you establish it.September 10, 2006 at 1:06 AM #34866rseiserParticipant
Very interesting. I have been contributing the maximum ROTH IRA amount since I heard about it, and I use an Ameritrade account, which works very well. Also great for trading, since one doesn’t pay short-term capital gains, while in the regular accounts one could rather hold for long-term capital gains. By the way, the ROTH is the greatest thing if you believe in high inflation, because it is the only instrument, where you don’t get taxed on the extra artificial gains caused by inflation.
Sorry for my low knowledge, but this post inspired a lot of questions:
a) Regarding that IRA rollover, can you roll-over more than your annual ROTH contribution limit? I never heard of this.
b) Regarding the income limit, does anyone know how capital gains are treated. E.g. if one has a salary of $80,000 and sends in the $4,000 to the ROTH at the beginning of the year. During the year, one ends up making $70,000 in capital gains from regular investments. Does this exceed the income limit? If yes, does one have to take out the $4,000 again?
I don’t expect precise answers, but good links would be nice.September 10, 2006 at 1:27 AM #34868PeaceParticipant
I’d like to see if anyone can settle something for me regarding ROTH vs traditional IRA.
I heard somewhere that traditional IRA money is treated like a traditional retirement (pension) and can not be taken in a bankruptcy.
Whereas, a ROTH money is considered part of your net worth and is subject to bankruptcy filings.September 10, 2006 at 9:55 AM #34881
vrudny, count me in with the “stupid”. Although my CPA was hounding me about switching over to Roth IRAs, I didn’t want to take the tax hit. So I prefer the tax deduction today over the tax savings later, hoping my tax bracket will be lower in the future. However, your way is probably better for the long run.September 10, 2006 at 12:57 PM #34895waiting hawkParticipant
I have a Vanguard account all in the money market 401k. They say that you can pull $10,000 first time buyer free from tax or penalty. But when I called Vanguard they said “you can’t put ur 401k money into an IRA because you still work there”. Is there anyways to do this? I would love to put down my cd’s and that extra 10k. That will get my principle down a ton.September 10, 2006 at 1:01 PM #34896
I used to move my 401(k) money over to Vanguard quarterly, even though I still worked for that company. Did the rules change? Maybe you need to talk to a supervisor. The rollover rules require that you move to the same account type, so you can’t move a SEP-IRA to an IRA, etc. But they should be able to set up an appropriate receiving account. Are you talking about the $10K you can withdraw penalty-free for the purchase of your first home?September 10, 2006 at 1:22 PM #34900JESParticipant
I left a company this year and have 401k money still in that company plan. Your saying that I can actually just move that money to a regular IRA since 401k’s and regular IRA’s are similar in that your income is not taxed upfront? Do I then have to wait a year to move some of that into a Roth IRA? I realize that I can’t move all of it.September 10, 2006 at 2:34 PM #34904
These kinds of questions are most accurately answered by a CPA. May I suggest Michael Gallon (smart, low overhead, very detail oriented and organized, really nice guy!) in El Cajon, at 619-440-4780.September 10, 2006 at 6:02 PM #34910CAwiremanParticipant
1) First, make sure you qualify for a Roth IRA. Your annual income may be an obstacle. Check the link below.
2) Talk to a Pro – a CPA and/or your tax guy to look at implications for what you'd be doing to short and long term tax burden.
If you decide its a go, then….
3)Open one at: Online – E*TRADE, Fidelity
In person: Vanguard
4) A job change is a good opportunity to convert your 401K to a Roth IRA.
Thanks for the info. Much appreciated. Also, PS thanks for the CPA contact. Always good to get a referral from someone.September 10, 2006 at 11:48 PM #34928rseiserParticipant
Above I wrote: “By the way, the ROTH is the greatest thing if you believe in high inflation, because it is the only instrument, where you don’t get taxed on the extra artificial gains caused by inflation.”
Thanks to the inspiration of Prof. Piggington I realized that the regular IRAs also end up at exact the same tax savings (if one is in the same tax bracket when withdrawing vs. contributing). This is because the deferred tax in the IRA (sort of a free loan) grows at the same rate as the principal, and the gains on these pay exactly for the taxes you pay on your other gains when you withdraw.
To repeat: Both regular and Roth IRAs protect you from artificial gains caused by inflation, and therefore anyone who is afraid of inflation should make the maximum contribution. (Otherwise, the homeowners could have their field day, since houses e.g. in low past appreciation areas could be good in a high inflation environment.)
Also, thanks to vrudny for answering some of the questions I stated and for the links. There are many more little details to consider, but one little advantage of the Roth seems to be that one can leave funds in there longer (growing tax free), even beyond age of 70. So if you get really old this might matter.September 11, 2006 at 9:11 AM #34948carlislematthewParticipant
Disclaimer: I am not a CPA.
However, I *have* heard that you don’t want to funnel ALL your money into these kinds of after-tax investments. If you do, you’ll certainly be guaranteeing that your income tax rate is lower at retirement as you’ll have no (or very little) taxable income!
I have seen suggested that one could invest in both regular IRA *and* Roth IRA. Then, you use the regular IRA up until the point where the taxes get a little high. Then fund the rest of your spending from accounts where you have already paid the tax.
As usual regarding investment strategies, I don’t think it makes sense to go 100% one way or the other.September 11, 2006 at 9:17 AM #34950bob007Participant
vrudny summarized the rules well. I have a problem with 45% of my net worth in 401ks/IRAs. I hope to convert them into Roth IRAs. One of the potential reasons for postponing my home purchase.September 11, 2006 at 9:18 AM #34951bob007Participant
what is the probability that govt will make Roth IRAs taxable in 2030 or 2040 ?
- You must be logged in to reply to this topic.