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OfflineBrian Jones
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IRA question
    #27331119 - 06/01/21 06:30 AM (2 years, 7 months ago)

I am over 60 so I don't pay the 10% penalty for withdrawing from an IRA. However if the assets are in the account less than 5 years I still pay taxes for gains in a Roth IRA. Under these circumstances wouldn't I be better off with a traditional IRA and get the initial tax break, since I know I will be withdrawing it within five years, and will pay taxes on appreciation whether it's traditional or Roth?


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"The Rolling Stones will break up over Brian Jones' dead body"    John Lennon

I don't want no commies in my car. No Christians either.

The worst thing about corruption is that it works so well,


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OfflineKryptos
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Re: IRA question [Re: Brian Jones]
    #27333085 - 06/02/21 08:01 PM (2 years, 7 months ago)

The way I always though about it was Roth is for young people that barely pay taxes now, and traditional is for old people that are paying out the ass already.

So, seems like a reasonable plan?

If I was qualified to give advice in this forum, I wouldn't be setting an alarm for work tomorrow.


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Invisibleblackdragon999
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Registered: 07/17/06
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Re: IRA question [Re: Brian Jones]
    #27348806 - 06/15/21 05:50 AM (2 years, 7 months ago)

Quote:

Brian Jones said:
I am over 60 so I don't pay the 10% penalty for withdrawing from an IRA. However if the assets are in the account less than 5 years I still pay taxes for gains in a Roth IRA. Under these circumstances wouldn't I be better off with a traditional IRA and get the initial tax break, since I know I will be withdrawing it within five years, and will pay taxes on appreciation whether it's traditional or Roth?




Hello Brian,

The 5-year period begins with the first tax year for which a contribution was made to a Roth IRA set up for your benefit. This is inconsequential as to the frequency of your contributions or individual holding periods of assets in your account.

If you already have a ROTH IRA and are not planning to withdrawal the entire amount within the next 5 years your distributions with eventually become qualified (tax exempt) after the probationary period for the account has lapsed.

Many factors include your current tax bracket, whether you have already opened either of said accounts and whether or not you are currently making contributions and/or will be continuing to make contributions through the lifespan of the account.

Personally, I would stick with the ROTH if your tax situation/income threshold allows.

Far better tax efficiency on the back end.

If your income is too high to contribute to a ROTH your other option is to contribute to an IRA and do a ROTH conversation in the future (back door ROTH)





See IRS Publication 590-B for more information.


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Edited by blackdragon999 (06/15/21 07:08 AM)


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OfflineSugabearcrisp
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Re: IRA question [Re: Kryptos]
    #27348819 - 06/15/21 06:19 AM (2 years, 7 months ago)

Quote:

Kryptos said:
The way I always though about it was Roth is for young people that barely pay taxes now, and traditional is for old people that are paying out the ass already. You do not pay for appreciation of the assets but you do have to wait 5 years from opening before withdrawal.


So, seems like a reasonable plan?

If I was qualified to give advice in this forum, I wouldn't be setting an alarm for work tomorrow.




To expand, you contribute post tax dollars to a roth because you think your current tax rate is lower than it will be when you are ready to withdraw. Your distributions are tax free but you need to wait 5 years from the time it was opened. Ideally you open a roth as a teen and make contributions during your younger years when your tax burden is lowest. There are also income limits, $125k for individuals that may prevent you from using a roth. https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2021


You contribute pretax to a traditional IRA or 401k to reduce your current adjusted gross to reduce tax burden.

So in your situation with your plan to withdraw in less than 5 years I think a traditional ira is best/only option.

https://www.irs.gov/retirement-plans/traditional-and-roth-iras


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OfflineBrian Jones
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Re: IRA question [Re: Sugabearcrisp]
    #27348910 - 06/15/21 08:09 AM (2 years, 7 months ago)

Yes, I was just using the IRA as an investment savings account for a car. I think I cost myself considerable money last year by using a Roth instead of a traditional, because I didn't know about the five year rule. I was waiting on the last stimulus check and then was going to use that, the 9K in IRAs and trade-in on my 2015 Chevy Cruse to buy a couple year old Altima or Mazda 6. Then in one weekend I went down 10K when my timing belt went at 80K miles and wrecked the engine and the car I bought in the meantime to get me buy while the work was done turned out to be a terrible deal as well. I live a little to far into the boondocks to get picked up by a rental car company or take an Uber or Lyft to work.

In any case, if I had put the 9K in traditional IRAs I could have deducted that much from my taxable income and gotten a nice return.

The Chevy cost me another grand in repairs last weekend, and now I'm afraid to sell the other car because I need transportation one way or another. The new plan is to get a new midsized Hyundai or Kia for the great warranty but I filed bankruptcy a couple years ago so the financing would be vicious. A friend who was on the board of a savings and loan said they are more forgiving about bankruptcies so I'm going to join one and save like crazy for a year and see what kind of a rate I can get. My Transunion and Experian scores are at 730 but the FICO is much lower.


--------------------
"The Rolling Stones will break up over Brian Jones' dead body"    John Lennon

I don't want no commies in my car. No Christians either.

The worst thing about corruption is that it works so well,


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OfflineSugabearcrisp
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Re: IRA question [Re: Brian Jones]
    #27348968 - 06/15/21 08:54 AM (2 years, 7 months ago)

Credit unions are my go to for autoloans, they have traditionally beaten or matched the best rates from dealers for me. They'll also typically do same as new on anything 3 model years or newer.

I would buy a honda if I were you, they really last and outside of brakes and muffler don't cost much to maintain. I have had 3 accords; drove a 94 till it hit 170k, traded in for a 03 which I drove till it hit 165k and sold it to but my MILs 04 which I drove from 70k till 170k then my daughter drove it to 220k and I sold it for $2k when my daughter was gifted the MIL's '13 for college graduation. I now drive a '17 honda ridgeline that has 70k and will be driven till the wheels fall off. Hyaundias and kias are good too but not quite there in terms of fit and finish.


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OfflineBrian Jones
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Re: IRA question [Re: Sugabearcrisp]
    #27349162 - 06/15/21 11:20 AM (2 years, 7 months ago)

Honda's might be best built affordable cars, but I want that 100,000 drivetrain warranty. With the money I have been spending on auto issues in the last 13 months, I could have leased a mid engined corvette and had money left over.


--------------------
"The Rolling Stones will break up over Brian Jones' dead body"    John Lennon

I don't want no commies in my car. No Christians either.

The worst thing about corruption is that it works so well,


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OfflineManianFHS
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Re: IRA question [Re: Brian Jones]
    #27349170 - 06/15/21 11:32 AM (2 years, 7 months ago)

If you never want to have car problems again get a Nissan Leaf. 6 years of Leafs and the only non-tire maintenance ive had are wiper fluid and cabin filters.


--------------------
notapillow said: "you are going about this endeavor all wrong. clear your mind of useless fear and concern. buy the ticket, take the ride, and all that.... "

ChrisWho said: "It's all about the journey, not the destination."


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OfflineSugabearcrisp
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Re: IRA question [Re: Brian Jones]
    #27350198 - 06/16/21 04:41 AM (2 years, 7 months ago)

Did some research and it seems like you should be able to withdraw your contributions to a roth IRA in less than 5 years, however if you withdraw earnings you will have to pay tax on them.

Quote:

In general, you can withdraw your Roth IRA contributions at any time. But you can only pull the earnings out of a Roth IRA after age 59 1/2 and after owning the account for at least five years.




Quote:

Roth IRA withdrawal rules if you’re 59½ or older
And you’ve owned a Roth IRA for less than five years ...
You’ll owe income tax but no penalty on earnings that you withdraw.




Hope that helps

https://www.nerdwallet.com/article/investing/roth-ira-withdrawal-rules


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OfflineBrian Jones
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Re: IRA question [Re: Sugabearcrisp]
    #27350344 - 06/16/21 08:15 AM (2 years, 7 months ago)

That's the point. I have to pay tax on them. If I used a traditional IRA I would also pay tax on them, but I could have deducted considerable $ from my taxable earnings. So in this particular situation, the traditional IRA had a big advantage and the Roth had none.


--------------------
"The Rolling Stones will break up over Brian Jones' dead body"    John Lennon

I don't want no commies in my car. No Christians either.

The worst thing about corruption is that it works so well,


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OfflineBrian Jones
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Re: IRA question [Re: ManianFH]
    #27350352 - 06/16/21 08:25 AM (2 years, 7 months ago)

Quote:

mick said:
If you never want to have car problems again get a Nissan Leaf. 6 years of Leafs and the only non-tire maintenance ive had are wiper fluid and cabin filters.




I like Nissan. My brother in law gave me a 2005 Altima with 149,000 miles. I drove it 50K more miles and only paid for a break job. But the guy at the oil change place told me the undercarriage was so rusted out I could be one pothole away from junking the car. The motor was still going great. I had the money so I bought the 2015 Chevy. I sold the Nissan to a lady for $400 and she's still driving it 13 months later.


--------------------
"The Rolling Stones will break up over Brian Jones' dead body"    John Lennon

I don't want no commies in my car. No Christians either.

The worst thing about corruption is that it works so well,


Extras: Filter Print Post Top
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