Yup. Converting to a Roth also has the downside of being able to buy fewer shares after the transfer.Raises hand. I know how you feel.
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Yup. Converting to a Roth also has the downside of being able to buy fewer shares after the transfer.Raises hand. I know how you feel.
Yes, I have that issue…….it is tough figuring out how to minimize the tax hit as opposed to trying to figure out how to pay the bills in retirement /sRaises hand. I know how you feel.
I've thought about that but it seems like if you have $100,000 IRA and convert it with an example of a 33% tax rate and then invest the resulting $66,000 in a Roth, you'll have a 1/3 less (but tax free) at the end instead of paying that 1/3 in taxes at the end. Seems like you end up with about the same amount of money.Convert it to a Roth IRA ASAP so you pay the tax based on it's current value, but all future earnings are totally untaxed! This is the best tax advice I was ever given!! ...unless we are not talking about the same thing...
Not an advice.
I'm mostly all in Tesla in my after tax brokerage account and in my IRA account. I just realized that if you are holding Tesla stock for the long term (like 10+ years), the IRA account has a gotcha that I hadn't thought about. Your gains will be taxed at the 15%-20% long term capital gains rate in the regular account but in the IRA, it'll be at the much higher federal income tax rate. Of course this is for the US and your state taxes will also treat them differently too.
OT: The big difference is that a Roth isn't subject to RMD's. So you could end up being forced to take large distributions from a traditional IRA that you don't want. (Resulting in a large tax bill.)I've thought about that but it seems like if you have $100,000 IRA and convert it with an example of a 33% tax rate and then invest the resulting $66,000 in a Roth, you'll have a 1/3 less (but tax free) at the end instead of paying that 1/3 in taxes at the end. Seems like you end up with about the same amount of money.
As I remember, If your under 59 1/2 , you will have to pay a 10% penalty on any amounts used for the purpose of paying the tax on the conversion?Convert it to a Roth IRA ASAP so you pay the tax based on it's current value, but all future earnings are totally untaxed! This is the best tax advice I was ever given!! ...unless we are not talking about the same thing...
Not an advice.
Edit-
Ah! That sounds logical. I hope others smarter than myself will chime in on this... I'd like to compare Traditional IRA vs. Roth, but also compare for buy and HODL shares type- investors vs. those with simple LEAPS and the smart kids doing the wheel thingy...
Edit - I searched for an appropriate US tax-related thread, but was not smart enough to find one - WHAT TO DO?
Otherwise, sorry if this is OT, I will not make any more posts on this... but I think it is useful and relevant for us US folks.
Folks would be wise to do their homework on IRA’s. Examples (I am not an accountant. Please correct me if I am mistaken):Exactly! Don't worry about the amount of future taxes. The important thing is to put off having to pay them as long as possible so your full assets can continue to compound. This will result in a much higher tax bill once all is said and done, and that is a very good thing.
Only if you are <59-1/2 for contributions/ rollover amount. So same penalty as the original IRA but earlier penalty free access.- You have to wait five years after the rollover to access the Roth funds penalty free.
If you were 59 1/2 when the rollover occurred, you’d still have to wait the five years. Correct?Only if you are <59-1/2 for contributions/ rollover amount. So same penalty as the original IRA but earlier penalty free access.
Earnings cannot be pulled out penalty/ tax free until 5 years and 59-1/2.
Worth the Wait: The Roth IRA 5-Year Rule
The amount you rolled over is penalty free once you are 59-1/2 (just like it would be in the original IRA). Earnings you withdrawl (after all rollover amounts have been pulled out) get taxed for the first 5 years even if you are older than 59-1/2.If you were 59 1/2 when the rollover occurred, you’d still have to wait the five years. Correct?
So I’m mistaken then.The amount you rolled over is penalty free once you are 59-1/2 (just like it would be in the original IRA). Earnings you withdrawl (after all rollover amounts have been pulled out) get taxed for the first 5 years even if you are older than 59-1/2.
Note that for non-rollover Roths, the 5 year timer on earnings starts from the inital contribution.
Do your own due diligence of this, but my understanding is yes, you could pull the rolled over amount out at 59-1/2 penalty free.So I’m mistaken then.
You’re saying that if you were to rollover a traditional IRA to a Roth IRA when you turned, say, 59, you could take distributions from the rolled over funds as soon as you turned 59 1/2?
For those in the US with assets in pretax IRAs, this is not so simple. Using these assets as collateral for a loan is itself a taxable event against the holdings.Edit: quoting @StrongGuy
You do you, but imo you’re NGMI. Wealthy don’t pay taxes…the ideal holding period for a stock is forever. Borrow against your assets if you need $ for expenses . NFA.
What I conclude from my due diligence is this.Do your own due diligence of this, but my understanding is yes, you could pull the rolled over amount out at 59-1/2 penalty free.
For direct contributions: can pull out any time penalty free
For rolled over contributions: penalty free either 5 years after that rollover (each has a 5 yr cool off) or 59-1/2.
That all looks correct to me. Only conversion amounts are treated differently, earnings on conversions are treated the same. Two 5-Year Rules For Roth IRA Contributions & ConversionsWhat I conclude from my due diligence is this.
If you’re over 59 1/2 and take a distribution from a Roth IRA that was funded via rollover and 5 years have not passed since the rollover:
* the 10% penalty would not apply as you say
* principal distributed would be tax free (because previous gains had been taxed at the rollover)
* earnings from the time of rollover would be taxable if distributed before 5 years.
I’m a little less clear on the rule wrt multiple conversions. I think it only matters wrt to the 10% penalty. That is, you could take earnings from a conversion tax free in less than 5 years, if the Roth account was at least 5 years old.
That is to say, you‘re not locking up your principal for 5 years if you do a rollover (once you’re 59 1/2).
US taxes.
I am considering closing/closing some DITM Calls at @450 jan 23 strikes next week when they qualify for long term capital gains after end of this week.
Any benefit to just closing the position and paying the 20% capital gain?
I could exercise, but I am not sure if I will be able to hold on to the stock for 1 year plus based on my other trading strategies. So After exercising, if I have to sell these stocks I would have to pay long term cap gains .. is my understanding...?
So any advantage to biting the bullet, closing the call and paying the long term cap gains. And then opening other call positions independently?