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-   -   Fair Warning..Conventional IRA vs Roth (https://www.talkofthevillages.com/forums/investment-talk-158/fair-warning-conventional-ira-vs-roth-281224/)

tcxr750 01-03-2019 11:25 AM

Fair Warning..Conventional IRA vs Roth
 
With the stock market moving down and your instinct being not to make withdrawals, just remember if you have a conventional IRA and you are 70 1/2 you are required to make withdrawals wether you want to or not.
That means that RMD is going to take another bite out of your IRA in a down market.
Example: 4% RMD and 1% management fee add to the losses in valuation of you IRA.
Any thoughts about a ROTH IRA?

retiredguy123 01-03-2019 11:52 AM

If you have to cash out stocks from a traditional IRA because of the RMD, you should be able to replace the stocks you sell, either inside or outside of the IRA. That is, assuming you have some diversity and/or extra cash to repurchase the stocks.

My Post 01-03-2019 12:38 PM

Every American should have a Roth IRA.

retiredguy123 01-03-2019 02:45 PM

Quote:

Originally Posted by My Post (Post 1612870)
Every American should have a Roth IRA.

Not every American. The Roth IRA never made sense for me because my income was always too high to contribute. The only other way was to convert money from a traditional IRA to a Roth, but that would have resulted in paying taxes on the amount converted. By the way, you cannot convert RMD money to a Roth.

thetruth 01-03-2019 04:00 PM

You should find someone you trust
 
Quote:

Originally Posted by tcxr750 (Post 1612854)
With the stock market moving down and your instinct being not to make withdrawals, just remember if you have a conventional IRA and you are 70 1/2 you are required to make withdrawals wether you want to or not.
That means that RMD is going to take another bite out of your IRA in a down market.
Example: 4% RMD and 1% management fee add to the losses in valuation of you IRA.
Any thoughts about a ROTH IRA?

A simple idea to find someone you can trust. Unfortunately it is far easier to say than to do. Most financial advice comes from someone trying to sell you something.

Required Minimum Withdrawal. NO ONE WANTS TO PAY TAX.
But, we lived in NY when I was earning the money. Money I put into an IRA, actually a SEP IRA allowed me to put away more than the original $2,000 limit. The deal was, save now and pay the tax later. As ex NEW YORKER'S, b moving to Florida, we escaped ever paying a 6% state tax, a 3% city tax on top of my higher than now federal income tax-I'm in a lower fed tax rate.
Oh and not certain but I think I also escaped the 13% I had to pay into social security.

I am not qualified to advise but that stated 4% RMD and 1% management fee. The percentage, your stated 4%-I'm not sure that is right or wrong. It goes up percentage wise as you get older. As I understood it you are supposed to expose your entire IRA to tax due to forced withdrawals by the time you reach 100.
Being a bit of a wise guy I told them they could keep xxxxxxxx if they will guaranty I live to 100.

If, you are paying 1% for someone to manage your IRA. You may want to check to see what the TRUTH is. If, you are paying 1% in total fees that may be reasonable. If, you are paying someone 1% to pick investment funds for you, you are paying twice. Once to the 1% person and then again you are paying management fees to the fund.

It is mind control by EXPERTS. If, you have a stock fund or whatever. You made 10% on it in ??????? and the management fee is 1%. Same number stated differently. At 1% they are taking 10% of what you made by risking YOUR MONEY. In a down year. Reminder the stock market goes down some years.
YOU lost say 10% so your return is minus 10% they still will take 1% of the total you have in that fund. Actually today, unlike in the past, the return they show on the fund is after the fees.

As, to shoulda coulda mighta. Hindsight is always 20/20. The best place to have had your money in 2018 was CASH. Right now you can get about 2.5% in the money market You can get free checking with that.

TAKE NONE OF THIS AS ADVICE-I JUST TRY TO POINT OUT WHAT MANY DO NOT SEE

thetruth 01-03-2019 04:21 PM

Re: Roth conversion
 
To do or not to do. No one on this website does or should have the needed information to advise you.
I am a contrarian. It was not that long ago when the talking heads were all singing the same song. Taxes are low the government debt is rising surely they will go up-RUN OUT, CALL ME, CONVERT TO OUR ROTH IRA BEFORE THE SKY FALLS DOWN.
HUM. there was a time when you could convert to a roth and then if you wish reverse it-If, I recall you needed to do the retraction the first year.
First the reversal option has been removed. Secondly rather than to go up AS THEY WERE SCREAMING, taxes have gone down.
As I stated elsewhere, your RMD is calculated on you living to be 100. You may want to look into an inherited IRA, My mother had an IRA-less than 100,000. When she passed away she left it to my sister and me as an INHERITED IRA. I'm not yet 70.5 but I do need to-AM FORCED TO take an RMD on that account and yes it is taxable to me-my mother never had to pay the tax on it. It is a bit of a pain in the neck BUT, it is a gift that keeps on giving years after my mother's passing. Aside-I could if I wished to withdraw the entire amount and pay tax on it. Surely, she would have had far more had she invested in the stock market.
Had she invested in the stock market say she bought ??????
for $100 over the say 42 years she had saved if it went up long term for the market of 8% a year it would be worth about 525.
I would have received it valued at the time of her death so 525
That 425 gain would not have been subjected to double taxation

petsetc 01-04-2019 10:47 AM

My addition to all this advice, take time to read Paul Merriman’s 3 free ebooks.
1. First-Time Investor
2. 101 Investment Decisions
3. Get Smart or Get Screwed

Found at paulmerriman.com

manaboutown 01-04-2019 11:56 AM

There used to be an income cap on converting from an IRA to a Roth so I was unable to convert until an anomalous year occurred at which time I took advantage of the situation and converted what I had in my IRA. I was never able to contribute more to the Roth but am happy I could at least get some funds into a Roth!

Recently the cap was removed. Roth IRA Conversion Rules | Can You Convert from a Traditional IRA?

dewilson58 01-04-2019 11:59 AM

Quote:

Originally Posted by retiredguy123 (Post 1612902)
Not every American. The Roth IRA never made sense for me because my income was always too high to contribute. The only other way was to convert money from a traditional IRA to a Roth, but that would have resulted in paying taxes on the amount converted. By the way, you cannot convert RMD money to a Roth.




Agree.

tcxr750 01-05-2019 12:30 PM

OK you can’t put your RMD money in a ROTH, but you can roll some or all of your conventional IRA into a ROTH. Consider tax consequences of doing that.
If your not 70 1/2 it might be a good idea to look at an RMD calculator. Plug in the numbers to see the results. Hypothetically you will still have money at age 100 left in your IRA. The downside is that the withdrawal percentages keep going UP which takes away some control from you. Of course for 2018 if your IRA lost value your RMD will be less even though the percentage it is based on goes up.
Consult your favorite Investment Advisor for the facts.
I naively thought I could meet the withdrawals requirement by taking out some money, not realizing that there is a REQUIRED withdrawal amount. Yes, I have a have an advisor. Apparently those portfolio “chat sessions” twice a year don’t cover all the important relevant topics.

retiredguy123 01-05-2019 12:45 PM

I think for most people who don't need the money, it is best to leave the traditional IRA alone and only withdraw the RMD every year, thereby delaying taxes as long as possible. One thing to consider is that, if you eventually need to go into assisted living or a nursing home, you will be able to use the traditional IRA funds, and possibly benefit from a huge medical tax deduction that could reduce your taxes at that time. I know one guy who converted all of his traditional IRA to a Roth so that his heirs would not need to pay the taxes. I guess that is another way to look at it, but it would not be my choice.

roypw 01-07-2019 08:05 AM

Yes the stock market is down but you don’t have to take your RMD now, you have all year so more than likely the stock market will go back up, don’t panic sell. As I get older I have sold stock to rebalance stock vs liquid assets so I always have enough cash to take my RMD. My rule over the years has been “never get in a position where you have to sell”.
I don’t have an advisor and my IRAs are with Fidelity and there are NO FEES at all on them. I moved from Merrill Lynch many years ago because of this. Keep cool, take time to think and do your best to keep the fear and greed out of your investment decisions.

collie1228 01-07-2019 08:37 AM

This is all very interesting to me (I'm 18 months from my first RMD). I have a question about the rate of return percentage used by the on-line RMD calculators. Most have 6% preselected, but you can adjust that rate in the calculator and come up with significant different RMD results. Is this percentage amount directed somewhere by the IRS? I can't find anything in Google that would answer my question. It makes a big difference to the calculation over time.

Scudder 01-07-2019 09:12 AM

RMD Requirements
 
Put your money in AT&T stock at over 5% and take the dividends. They have increased for about 40 years in a row. No worries.

Mikeod 01-07-2019 09:24 AM

Quote:

Originally Posted by collie1228 (Post 1613982)
This is all very interesting to me (I'm 18 months from my first RMD). I have a question about the rate of return percentage used by the on-line RMD calculators. Most have 6% preselected, but you can adjust that rate in the calculator and come up with significant different RMD results. Is this percentage amount directed somewhere by the IRS? I can't find anything in Google that would answer my question. It makes a big difference to the calculation over time.

Since the RMD is computed on you IRA year-end balance, the rate of return figure you use will affect that balance and therefore your RMD. If your IRA grows more than 6%, your RMD goes up: if less, not as much.


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