OT: question for the soon to be retirees on IRA's

[Smiley]

So for as long as I can remember I have been contributing to my companys SIMPLE IRA and paralleling a contribution to the max on my personal IRA even though I got no tax preference for the personal IRA aside from the interest accumulating tax free. Fast forward as I turned 60 this year do I continue to place funds in a personal IRA or just move these to a retirement fund as I still contribute to my new company's 401K now and to the max allowed.

Seems like book keping could be a nightmare in the 4 more years that I will start to need these funds as I turn 61 in Feb 2013.

[rccardr]

I'm in the same age bracket and circumstances as you and had many of the same questions.

After managing our own investments and finances for 40+ years, I finally enlisted the help of a CFP who specializes in retirement planning.

Turns out that someone who does this kind of stuff full time is actually better at it than I am. Go figure.

[Dave]

Not sure that I understand the question. What's the difference between your personal IRA and what you've referred to as a retirement fund?

When I left my company after 22 years, I took all of my money out of the company fund and rolled it over to a T. Rowe Price traditional IRA. I've also made additional contributions to other TRP IRA funds, up to the maximum allowed.

I just turned 59-1/2, so I can start withdrawing money, without incurring a 10% early withdrawal tax.

http://20somethingfinance.com/2013-maximum-401k-contribution/

http://20somethingfinance.com/consolidate-401k-into-rollover-ira/

[dekindy]

do I continue to place funds in a personal IRA or just move these to a retirement fund

You will not be able to move your personal IRA funds to your company's 401k because as you noted it is a nondeductible IRA with tax-deferred growth only so you will have to keep those funds separated from 401k (tax-deductible and tax-deferred fund and 100% taxable when withdrawn at retirement) accounts as the personal IRA has a non-taxable basis component that needs to be tracked so that you do not pay income taxes on the basis component when withdrawn at retirement(not 100% taxable when withdrawn).

The maximum 401k deduction for 2013 I believe is $17,000 and for your age there is a catchup provision of an additional, again check me, of $5,000 or $5,500 for a total of $22,000 or more that you can contribute to a 401k which should be significantly more than the maximum allowed for a Simple IRA that you have previously experienced.

[biker72]

So for as long as I can remember I have been contributing to my companys SIMPLE IRA and paralleling a contribution to the max on my personal IRA even though I got no tax preference for the personal IRA aside from the interest accumulating tax free. Fast forward as I turned 60 this year do I continue to place funds in a personal IRA or just move these to a retirement fund as I still contribute to my new company's 401K now and to the max allowed.

Seems like book keping could be a nightmare in the 4 more years that I will start to need these funds as I turn 61 in Feb 2013.

Unless your personal IRA is a Roth you will be paying taxes on any gain inside the account when you start withdrawing.

How much does your company match your 401K contribution???

[Smiley]

I guess the question is to move it to a IRA ($6500) which I do not recieve any tax credit on since I have a 401K at work or do I just ear mark the funds to a personal saving account and call it my retiremement monies.

[Ken Robb]

Unless your personal IRA is a Roth you will be paying taxes on any gain inside the account when you start withdrawing.



This seems misleading to me. As I understand it when a person withdraws money from an IRA he pays taxes on the amounts withdrawn like it is ordinary income at that time but you don't pay taxes on the gain inside the account per se. If there has been gain in the account he will have more to withdraw and therefore higher taxable income but there is no specific tax levied on gains on assets held in an IRA.

[biker72]

This seems misleading to me. As I understand it when a person withdraws money from an IRA he pays taxes on the amounts withdrawn like it is ordinary income at that time but you don't pay taxes on the gain inside the account per se. If there has been gain in the account he will have more to withdraw and therefore higher taxable income but there is no specific tax levied on gains on assets held in an IRA.

You pay nothing until you withdraw from the IRA. You have to set up a cost basis with the IRS so that when you do withdraw only the gain is taxable.

A ROTH IRA is totally tax free if kept 5 years.

[Dave]

If you have $6500 in an account that you want to move, you need to know if that money has been taxed or not. If it has never been taxed, then it's in some sort of retirement fund that must be rolled over to another fund that's similar in nature - being taxed only upon withdrawal. If the money is withdrawn, there's a limited time to complete the rollover, or you'll owe income tax on it, at the end of the year.

If the money has been taxed, then it's no different than the money in your checking account or personal savings at your bank. You can only put it into an IRA or other retirement fund if your total contributions don't exceed the yearly maximum.

You can save as much as you want, in stock mutual funds, or whatever other instrument you choose, but that type of account is not an IRA or retirement fund. It's just after-tax income put into savings. When it's withdrawn you only pay tax on the earnings, rather than the whole amount.

[Hawker]

This thread is a wonderful example of why the Income Tax laws need to be totally re-done and simplified. But that will never happen, regardless of what party is in power. "Power" being the key word.

[dekindy]

I guess the question is to move it to a IRA ($6500) which I do not recieve any tax credit on since I have a 401K at work or do I just ear mark the funds to a personal saving account and call it my retiremement monies.

Your question is confusing. I don't know what "it" is so how can I advise you.

I assume your Simple IRA balance is much higher than $6,500 since you have been contributing to it for "as long as you can remember"; as opposed to your nondeductible IRA. So "it" you are referring to is your nondeductible IRA? Your nondeductible IRA is already an IRA so why would you want to move it to an IRA. Assuming the $6,500 is your nondeductible IRA, as I said earlier it is not eligible to be moved to a the 401k or a traditional IRA since the nondeductible IRA has a basis that is not taxed when distributed and must be segregated from and accounted for separately from the Simple IRA and 401k.

Leave your nondeductible IRA as is.

Your Simple IRA can be left as is(verify this but it is an IRA account so I believe it can remain as is), transferred to a traditional IRA, or moved to your new company 401k. Leave as is if you are satisfied with your investment options. If not satisfied with your investment options, first choice would be to roll it to your new company 401k if you are satisfied with those investment options or roll it to a traditional IRA if you prefer different investment options than your new company 401k.

Don't screw it up!

[dekindy]

my personal IRA even though I got no tax preference for the personal IRA aside from the interest accumulating tax free

This describes a nondeductible IRA.

Withdrawals at Retirement



Withdrawals from your traditional IRA that contains non-deductible contributions are treated differently for tax purposes than traditional IRAs without non-deductible contributions. When you take a qualified withdrawal, which is a withdrawal when you are 59 1/2 years old or older, only part of your withdrawal is taxable. To calculate how much is taxable, you need to calculate the percentage of your traditional IRA's value that comes from the non-deductible contributions. For example, if your IRA is worth $40,000 and you made $30,000 of non-deductible contributions, 75 percent of your withdrawals would be tax-free. However, you need to recalculate this percentage each time you take a withdrawal. You must file form 8606 with your taxes to document the tax-free percentage.



Read more: Tax Treatment of Non-deductible IRA Contributions | eHow.com http://www.ehow.com/about_6116633_tax-treatment-non_deductible-ira-contributions.html#ixzz2GOEYni1B

[Smiley]

dekindly and all, I guess another way to put it is I am fully contributing to the MAX on my old employers Simple IRA plan and now with my new employers 401K plan, I ALWAYS have contributed to a personal IRA even though the funds are taxed since the $6500 I have been putting in does not qualify for any deductions since I already have a employer based plan. So when I turn 61 why place these funds in a IRA anymore since shortly I will be withdrawing them (I still plan to set these monies aside for savings). The question is put them in an IRA where the interest is non taxed or screw that just place these funds in my future retirement saving which is a fully taxed account.

BTW you are correct and my account tells me it will be nightmarish to separate which IRA funds were treated as taxed before inclusion and which were treated favorably from a tax standpoint. Luckily he has these figures on his computer system.

[cnighbor1]

You can't draw on your IRA till your 70 1/2 so you have a long ways to go.
Has too your ?'s I would find a good financial planner and have him explain your options. You don't need to have him do anything but just explain options than study those and read up till you understand them. then do something.
I use
http://www.merriman.com/blog/

[scooter]

[QUOTE=cnighbor1;1264579]You can't draw on your IRA till your 70 1/2 so you have a long ways to go.


It's more complicated than that. You can begin withdrawing without penalty from a traditional IRA at 59 1/2 but you MUST begin making required minimum withdrawals by 70 1/2. Check the irs.gov website for rules and regulations. If it sounds too complicated, you might want to see a financial adviser.

[Dave]

You can withdraw money from an IRA at 59-1/2 with no tax penalty. I just turned 59-1/2 and plan on using some of mine for hobbies.

http://moneyover55.about.com/od/iras/qt/Ira-Early-Withdrawal-Penalty.htm

[Smiley]

[QUOTE=cnighbor1;1264579]You can't draw on your IRA till your 70 1/2 so you have a long ways to go.


It's more complicated than that. You can begin withdrawing without penalty from a traditional IRA at 59 1/2 but you MUST begin making required minimum withdrawals by 70 1/2. Check the irs.gov website for rules and regulations. If it sounds too complicated, you might want to see a financial adviser.

scooter is 1000% correct by 70 1/2 they tax you if you have not withdrawn the funds. I probably will just go ahead and put this money in my IRA and my plan is not to with draw anything until I retire sometime by 65 yo.

[rccardr]

Guys, please. A big part of my job is running a $58MM+ 401k and I went to a CFP for advice and guidance.

Despite everyone's best intentions, there's a bunch of misinformation being given out here. Good note on the complexity of the tax laws, which kinds of underscores my point.

For some things, a professional is best.

[biker72]

Guys, please. A big part of my job is running a $58MM+ 401k and I went to a CFP for advice and guidance.

Despite everyone's best intentions, there's a bunch of misinformation being given out here. Good note on the complexity of the tax laws, which kinds of underscores my point.

For some things, a professional is best.

+1
You mess up and can wind up owing the IRS a lot of money....:)

[Llewellyn]

+1
You mess up and can wind up owing the IRS a lot of money....:)

Very true. We went to a seminar a couple of months ago and the speaker mentioned a couple of cases where clients of his had gone ahead and done something without getting advice, and they ended up owing the Tax Office a small fortune, when they could have paid almost nothing if they had seen their financial planner first and done things a bit differently.

Financial planners can seem expensive on the surface, but if they can save you forking out your hard-earned to the tax man then IMO, they are worth the fees

Disclaimer: I am NOT a financial planner

[Don49]

I've used and recommend this book: http://www.amazon.com/IRAs-401-Other-Retirement-Plans/dp/1413313930/ref=sr_1_5?ie=UTF8&qid=1356825928&sr=8-5&keywords=iras%2C+401%28k%29s

[Ralph]

Keep in mind, depending on your personal income situation, on income that is considered taxable income from retirement accounts, you may not have to pay income taxes, if you have enough deductions.

I'm retired, and every year, in December, I look over all our taxable income to this date, and then compute if I can slip a little extra from our retirement funds at little or no tax. Even if I have no particular need for it at the time.

[Llewellyn]

Guys, please. A big part of my job is running a $58MM+ 401k and I went to a CFP for advice and guidance.

Despite everyone's best intentions, there's a bunch of misinformation being given out here. Good note on the complexity of the tax laws, which kinds of underscores my point.

For some things, a professional is best.


This is still the best piece of advice that has been given in this thread

[Chance]

It's more complicated than that. You can begin withdrawing without penalty from a traditional IRA at 59 1/2 but you MUST begin making required minimum withdrawals by 70 1/2. Check the irs.gov website for rules and regulations. If it sounds too complicated, you might want to see a financial adviser.

Correct, but a person can also withdraw from an IRA prior to age 59-1/2 without penalty if done correctly. One such exception is a provision that allows a person to start “equal” withdrawals from IRA savings. Equal distributions must be maintained until 59-1/2 or for a minimum time (was 5 years but may have changed), whichever is longer. If a person doesn’t abide by the distribution schedule he has to pay the 10% penalty on all previous withdrawals.

Just bringing this up because some people with enough savings in IRAs can retire prior to 59-1/2 while having access to his/her savings without paying the 10% penalty.

[Ralph]

Correct, but a person can also withdraw from an IRA prior to age 59-1/2 without penalty if done correctly. One such exception is a provision that allows a person to start “equal” withdrawals from IRA savings. Equal distributions must be maintained until 59-1/2 or for a minimum time (was 5 years but may have changed), whichever is longer. If a person doesn’t abide by the distribution schedule he has to pay the 10% penalty on all previous withdrawals.

Just bringing this up because some people with enough savings in IRAs can retire prior to 59-1/2 while having access to his/her savings without paying the 10% penalty.

Correct....and another little known rule I was able to take advantage of shortly after retirement....the "net unrealized appreciation" rule. Should you have some highly appreciated company stock (which I did) in a company profit sharing plan (and maybe some other types of plans...I don't know), you can remove that highly appreciated stock from the retirement plan, transfer it to a taxable account, pay ordinary income taxes on only the amount the company contributed to the stock, in my case they awarded it to me over the years, then hold it one year and begin selling it, and pay the long term gain rate. Not the ordinary income rate you would normally pay when you remove money from a retirement account. it's a tad more complicated than this, but not much. I did this about 14 years ago, so some of the details are kinda fuzzy now. But I had a lot of company stock, so it was a big savings. Also....it may not have to be your company stock, just any highly appreciated stock, don't remember.

[54ny77]

can you self-direct your ira to buy vintage campy parts?

:p

[zap]

can you self-direct your ira to buy vintage campy parts?

:p

It's possible. I know u can with other investments such as houses and automobiles and art but the admin is daunting enough that it would probably not be worth pursuing for bicycle parts....unless vintage campy prices are a lot higher than I think they are.