I’m kind of disappointed that none of you clever folks picked up on the hidden message in my post.
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Roth v Traditional IRA
- Thread starter engle
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@KarenRei .....?I’m kind of disappointed that none of you clever folks picked up on the hidden message in my post.
I’m kind of disappointed that none of you clever folks picked up on the hidden message in my post.
I didn't want to invoke Karen's ire by acknowledging it ...
edit: I see @Prunesquallor beat me to this
Causalien
Prime 8 ball Oracle
Had some brilliant thought about my tax situation. Want to flesh it out with you guys to see if there's anything wrong. Too much TSLA stock, don't want to sell to create a tax hit.
So here's what I am going to do. Take out a margin loan, currently at 2.75% and buy products that payout dividends based on the 5 year interest rate. These products decrease in value as interest rate fall and increase in value as interest rate rise. Each 1% rise in interest rate create 5% rise in capital in these and vice versa for the fall. Dividend payouts of these sits around 4% to 6%.
Now as FED decrease interest rate, it has the general effect of increasing stock price and also lift TSLA with it. This increase the margin room. But the price of these products fall so the margin room decreases at the same time.
If FED increases interest rate, TSLA stock decreases and the margin room decreases, however these products will increase in value and increasing margin room as well. Making it a wash again.
Now the crucial part is to figure out how much risk there are of TSLA not tracking FED rate and also the slippage between how much TSLA stock move vs how much these rate product price move and using appropriate SPY products to offset it.
Anyway, I make 2%~3% without taking the upfront tax hit. Which was the intended purpose anyway if I want to sell TSLA, it is to buy cash flow generating products.
So here's what I am going to do. Take out a margin loan, currently at 2.75% and buy products that payout dividends based on the 5 year interest rate. These products decrease in value as interest rate fall and increase in value as interest rate rise. Each 1% rise in interest rate create 5% rise in capital in these and vice versa for the fall. Dividend payouts of these sits around 4% to 6%.
Now as FED decrease interest rate, it has the general effect of increasing stock price and also lift TSLA with it. This increase the margin room. But the price of these products fall so the margin room decreases at the same time.
If FED increases interest rate, TSLA stock decreases and the margin room decreases, however these products will increase in value and increasing margin room as well. Making it a wash again.
Now the crucial part is to figure out how much risk there are of TSLA not tracking FED rate and also the slippage between how much TSLA stock move vs how much these rate product price move and using appropriate SPY products to offset it.
Anyway, I make 2%~3% without taking the upfront tax hit. Which was the intended purpose anyway if I want to sell TSLA, it is to buy cash flow generating products.
The Accountant
Active Member
I think he meant 54,000.
6,000 invested "after tax" in a traditional IRA grows to 60,000....results in 54,000 gain.
Sending that over to a Roth results in 54,000 taxable income. The 54,000 is taxed.
I think this is what he meant.
@UncaNed It was in response to a scenario I proposed of converting exactly $6k of a traditional IRA to Roth IRA. Such as one would do with a maximum ‘backdoor’ roth contribution but @MP3Mike was pointing out the pro-rata rule on conversions doesn’t allow ‘backdoor’ technique for all situations. Specifically the illustration is if you have $6k of post tax contributions and $54k of gains in traditional IRAs converting only $6k (not converting the full $60k) the tax treatment is pro-rata so of the $6k conversion $5400 is taxable.
OT: And it doesn't have to be gains in the traditional IRA. It could all just be pre-tax contributions. You don't get to choose which money you back-door, the IRS made that decision for you, you are transferring a proportional amount of you pre/post tax money.
Ah!... so when converting $6,000 to Roth IRA, $5,400 of that is taxable, not paying $5,400 actual tax.
Thank you, @The Accountant and @davepsilon, and @MP3Mike for taking the time to clear that up for me. Roth IRA's RAWK!
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CyberDutchie
Active Member
What’s up with the sudden after hours dro
If you have a regular “buy-and-hold-long” trading account (not a retirement account) you only have to pay capital gain tax when you sell shares. The capital gain tax is 0% if your income is below $40,000. So you can take money out without paying any taxes, as long as you don’t have much other income. Am I missing something?
If you have a regular “buy-and-hold-long” trading account (not a retirement account) you only have to pay capital gain tax when you sell shares. The capital gain tax is 0% if your income is below $40,000. So you can take money out without paying any taxes, as long as you don’t have much other income. Am I missing something?
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