Roth v Traditional IRA

[Beltsbear]

We need a new button along with agree/disagree. It should be “thats nice but take it to another thread”.

Edit: Roth/401k has been figured out for some time, and different from person to person. Nothing new here and way off topic.

 

[Joe F]

Right, you are either taxed on the funding side (Roth), or the withdrawal side (401k or traditional IRA). If the tax rate is the same in both instances, then the net proceeds are identical regardless of the the rate of return on the account. If the tax rates are different, you are better off biasing to the lower tax option.

OT, but Important WRT market (not to mention, massive $TSLA) gains.

One has to take RMD into account if one expects massive gains in a tax advantaged account. Strategically moving funds into a Roth in a lower tax year will allow for tax free growth. Not advise. Consult your tax advisor.

Note too that there are Medicare payment considerations which can affect premiums.

Also note RMD rules changed in 2020: First withdrawal increased to age 72 from 71.5.

 

[Unpilot]

So since the Market is closed I thought I would weigh in on the 401k stuff.

I have almost all my TSLA stock in a traditional 401k. My firm belief is it is going to appreciate so much I really won't care what the tax penalty will be.

I could raise my heart rate a bit and ponder moving fund's here and there. Or...go have a beer with friends and not worry about it.
We used to have friends that notated every purchase.....even as small as a bottle of water.
They are not our friends any more as the worry they exuded every day was palatable.

I am extremely fortunate in that I was able to hook my retirement train to a literal SpaceX rocket (TSLA)

Loosing a few percentage points to the tax man ain't gunna worry me none!


YMMV Not advice

 

[Silent Ludicrosy]

Rolling conventional IRA or 401k to a Roth is a good way to take full advantage of the $7500 EV tax credit if your taxable income is too low otherwise.

 

[dl003]

OT, but since this is one of the few areas my little brain can conjure up some ideas in, so what the heck…
In my opinion, it's about much more than taxes.
(1) Liquidity: Roth IRA allows you to withdraw the contribution any time for any reason free of taxes and penalties. So if liquidity is a concern, like when you're young, Roth IRA makes sense.
(2) Where you are in your career. If you're young and don't make a lot of money, pay the tax now.
(3) Traditional IRA is really not a good idea. Note that the tax deduction for Traditional IRA phases out extremely quickly, think $100,000 for married couples. So that correlates nicely with point (2).
(4) Since Traditional IRA is so restrictive, let's use a Traditional 401k as point of reference. Most plans have piss poor investment options, consisting mostly of funds.
So I see my Traditional 401k as a safety net, money that I can't touch until I'm 60. I only contribute enough for full matching. The rest and majority of my money is in Roth IRA and brokerage accounts. I need the liquidity.

 

[theschnell]

OT, but since this is one of the few areas my little brain can conjure up some ideas in, so what the heck…
In my opinion, it's much more about taxes.
(1) Liquidity: Roth IRA allows you to withdraw the contribution any time for any reason free of taxes and penalties. So if liquidity is a concern, like when you're young, Roth IRA makes sense.
(2) Where you are in your career. If you're young and don't make a lot of money, pay the tax now.
(3) Traditional IRA is really not a good idea. Note that the tax deduction for Traditional IRA phases out extremely quickly, think $100,000 for married couples. So that correlate nicely with point (2).
(4) Since Traditional IRA is so restrictive, let's use a Traditional 401k as point of reference. Most plans have piss poor investment options, mostly funds.
So I see my Traditional 401k as a safety net, money that I can't touch until I'm 60. I only contribute enough for full matching. The rest and majority of my money is in Roth IRA and brokerage accounts. I need the liquidity.

Since I'm already logged in.
(1) Is definitely not true. There are several reasons that allow you to tap a Roth early, but its most certainly not "for any reason" free of taxes and penalties.

EDIT: I'm wrong and dl003 is right. CONTRIBUTIONS can be withdrawn without taxes or penalties for any reason. Just not earnings...

 

[dl003]

Since I'm already logged in.
(1) Is definitely not true. There are several reasons that allow you to tap a Roth early, but its most certainly not "for any reason" free of taxes and penalties.

Contribution, not just Roth money in general. Contributions are free to withdraw.

 

[EVMeister]

Maybe it’s OT, but more relevant than most of the stuff talked about on here. Should be easy enough to skip over if you’re not interested.

No, it's actually too annoying as it dominates the thread and is of no relevance to me at all. Having to sift through interesting posts and irrelevant/boring (to me and many others) ones isn't something I should have to do. One or two off topic posts on a variety of topics is fine, but this many on one topic - too much.

 

[theschnell]

Contribution, not just Roth money in general. Contributions are free to withdraw.

You're right, I'm wrong. Missed the word contributions and honestly also did not know that. My bad. Was thinking of earnings and did not realize there were different rules for contributions. Good to know.

 

[jbcarioca]

I second every part of this post.

I mean, if this was idle weekend chat, sure... but it's been going on and on, here on a big day.

I third it. All this discussion of US domestic personal tax efficiency is fine in moderation but on and on, not so much.

 

[Jo-]

Since I'm already logged in.
(1) Is definitely not true. There are several reasons that allow you to tap a Roth early, but its most certainly not "for any reason" free of taxes and penalties.

#1 is true. You can withdraw a CONTRIBUTION at any time without penalty...any more than that would incur a penalty.

 

[KarenRei]

Okay, from hereon (until we've gotten and are done discussing the P&D report), whenever anyone writes a post about a Roth IRA, I'm going to write a post about the Real IRA.

 

[KarenRei]

If q1 demand were to be bad, it hurts no matter how you slice it. My impression of Tesla is that if the choice between cutting production and lowering prices had roughly equal consequences, that they would rather keep production high.

While I wouldn't bet on huge odds, I think it's more likely than not that we won't see any price cut going into Q1. There's been so much Q4 demand pushed off into Q1 already. But then again, you never know.

Also to stay on topic, do you have any advice on Roth vs. traditional IRA ?

Well, if you were to have joined the Real IRA, that means that you rejected the Provisional IRA's ceasefire of 1994 and wished to continue the armed struggle for a united Ireland.

 

[Silent Ludicrosy]

I’m buying 14 shares as soon as my $6k 2020 IRA contribution clears. Expect the stock price to reach a new ATH as a result. There, IRAs are back on topic.

 

[KarenRei]

I’m buying 14 shares as soon as my $6k 2020 IRA contribution clears. Expect the stock price to reach a new ATH as a result. There, IRAs are back on topic.

Note that sending money to the Real IRA can fall under anti-terrorism statutes and face legal repercussions.

Stocks are not used in the punishment of IRA members convicted of crimes; the last time that stocks have been used as a punishment in the United Kingdom was 1872.

 

[KarenRei]

I prefer Roth. I've done one backdoor conversion to Roth and it has TSLA with an avg purchase price of 320.

Well, the DUP believes that Sinn Féin is using backdoor conversions of IRA funds.
IRA cash 'going to Sinn Féin'

 

[JustMe]

I’m so ready to get past the Q4 Production
Report and move on to Tesla’s future goals.
Anyone care to guess their next 5 year plan?

Really interested in what others are thinking.
One direction might be a car cheaper than the 3.
Though we haven’t heard much on that front...
High market share may require an affordable car

 

[EVNow]

Well, the DUP believes that Sinn Féin is using backdoor conversions of IRA funds.
IRA cash 'going to Sinn Féin'

You are not only getting duped by DUP, but also gaining the ROTH of IRA.

 

[ZeApelido]

Okay, from hereon (until we've gotten and are done discussing the P&D report), whenever anyone writes a post about a Roth IRA, I'm going to write a post about the Real IRA.

I'm not clicking on any link from you any more. I'm afraid some cat ".png file" is actually going hack my computer to transfer my TSLA shares to somewhere in Iceland.

 

[CorneliusXX]

Okay, from hereon (until we've gotten and are done discussing the P&D report), whenever anyone writes a post about a Roth IRA, I'm going to write a post about the Real IRA.

If that doesn't solve the problem I can start talking about Ira - A nice old Jewish man who lives down the road.