ASK A FINANCIAL ADVISOR!! Money questions? Bring 'em on!!
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True. However, doing so means you are taking a distribution from your traditional IRA and that money will be considered ordinary income in the year in which you do it. That means potentially a very large tax bill as well as penalties if you are under age 59 1/2.
IIRC, doing a rollover from a traditional to a Roth does incur a tax penalty, but you would incur that same penalty (or higher depending on the tax climate in the future) at retirement anyway. Better to take it now, in my opinion.
No, there is a tax, and there is a penalty. They are separate. If you cash out your retirement before certain age you pay tax and you pay a penalty.
I do not believe there is a penalty, just the tax (I misspoke a bit). Doing some Googling now to check my memory.
Traditional 401ks can be rolled over into a Traditional IRA with no taxes or penalties.
Traditional IRAs can be rolled over into Roth IRAs with the money being taxed at your usual tax rate, no additional penalty, and must remain in the Roth IRA for 5 years or a penalty will incur.
Yes, traditional to traditional has no tax consequences. But there IS a potential penalty on converting to a Roth (which is what you're talking about). If you are under the age of 59 1/2, it's an early distribution and you WILL face a 10% penalty.
Also, a bit of misnomer when you say your "usual tax rate." Any distribution counts as ordinary income which will jack up your income for that year and likely move you into a higher tax bracket.
The potential penalty is only incurred if you try to received distributions from your Roth when under 59 1/2.
Sorry man. You're wrong. I do this stuff every day. A withdrawal from an IRA - traditional or Roth - prior to the age of 59 1/2 will be subject to a 10% IRS penalty. The only common exception (and there are uncommon ones) is the rule of 72t in which a person takes substantially equal distributions for the longer of 5 years or attainment of age 59 1/2. The info you got off Fidelity is right, but it's incomplete.0 -
Yup, I gotta roll out too. Have fun in here!! :bigsmile: :bigsmile:0
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Sorry man. You're wrong. I do this stuff every day. A withdrawal from an IRA - traditional or Roth - prior to the age of 59 1/2 will be subject to a 10% IRS penalty. The only common exception (and there are uncommon ones) is the rule of 72t in which a person takes substantially equal distributions for the longer of 5 years or attainment of age 59 1/2. The info you got off Fidelity is right, but it's incomplete.
Remember tho that in a ROTH IRA you can withdraw contributions at ANY TIME and for ANY REASON without tax or penalty.0 -
OK, really leaving now!!0
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Sorry man. You're wrong. I do this stuff every day. A withdrawal from an IRA - traditional or Roth - prior to the age of 59 1/2 will be subject to a 10% IRS penalty. The only common exception (and there are uncommon ones) is the rule of 72t in which a person takes substantially equal distributions for the longer of 5 years or attainment of age 59 1/2. The info you got off Fidelity is right, but it's incomplete.
Everything that I'm looking up says that there is no 10% penalty when rolling over from a Traditional IRA to a Roth IRA regardless of age. Source?
From another website:Can I convert my traditional IRA funds into a Roth IRA?
Answer:
Yes. Any funds you convert during the tax year, other than amounts that represent nondeductible (after-tax) contributions to your traditional IRA, are treated as taxable income for that year. This means that if the contributions originally made to your traditional IRA were deductible, you may have to pay income tax on the amount converted to the Roth IRA. Also, although the premature distribution tax (for IRA withdrawals prior to age 59½) does not apply when you convert funds to a Roth IRA, it may apply if you later withdraw from the Roth IRA within five years after you convert funds. Finally, you cannot convert required minimum distribution amounts from a traditional IRA to a Roth IRA. Given the possible tax consequences of this conversion, you may wish to consult experienced tax and financial professionals before you commit to the process.
Note: You can also roll over ("convert") funds from an employer sponsored-retirement plan to a Roth IRA. The same rules described above generally apply.
Bolded the relevant part.0 -
From the IRS website:
"Generally, the amounts an individual withdraws from an IRA or retirement plan before reaching age 59½ are called ”early” or ”premature” distributions. Individuals must pay an additional 10% early withdrawal tax and report the amount to the IRS for any early distributions, unless an exception applies."
http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---Tax-on-Early-Distributions0 -
Please remember an --Inherited IRA no 10% penalty would you like to try for double jeopardy--I really do this every day. Remember the 72t isn't the only way--just reminded an accountant today of this---0
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From the IRS website:
"Generally, the amounts an individual withdraws from an IRA or retirement plan before reaching age 59½ are called ”early” or ”premature” distributions. Individuals must pay an additional 10% early withdrawal tax and report the amount to the IRS for any early distributions, unless an exception applies."
http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---Tax-on-Early-Distributions
That link was just for the tax brackets in the U.S. Wasn't linking it for the early disbursement discussion.
Also, your link substantiated my claim. Scroll down to the Exception for Rollovers.
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Please remember an --Inherited IRA no 10% penalty would you like to try for double jeopardy--I really do this every day. Remember the 72t isn't the only way--just reminded an accountant today of this---
We weren't talking about inherited IRAs which - as you clearly know - have different rules than traditional IRAs. And I really do this every day too.0 -
I am pretty broke. How do I stop being broke?
I have a couple of offers for Sugar Daddies. Do I need to tell the IRS about this? I'd rather not pay taxes.
Sugar daddy contributions are classified as "gifts" not income... regardless of what unsavory activities produced these "gifts". First 12k a year is 100% tax free.0 -
From the IRS website:
"Generally, the amounts an individual withdraws from an IRA or retirement plan before reaching age 59½ are called ”early” or ”premature” distributions. Individuals must pay an additional 10% early withdrawal tax and report the amount to the IRS for any early distributions, unless an exception applies."
http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---Tax-on-Early-Distributions
That link was just for the tax brackets in the U.S. Wasn't linking it for the early disbursement discussion.
Also, your link substantiated my claim. Scroll down to the Exception for Rollovers.
From the rollover section:
"in-plan Roth rollovers or eligible distributions contributed to another retirement plan or IRA within 60 days"
What that means is if it's either (A) Roth to Roth or (B) was contributed to a traditional plan within 60 days, there is no penalty. Otherwise there is for someone under 59 1/2. You're wrong here man. You can try and debate me all you want but I have handled many Roth conversions for clients. They pay the tax every time and, if they are under 59 1/2, they would pay a penalty as well.0 -
I am pretty broke. How do I stop being broke?
I have a couple of offers for Sugar Daddies. Do I need to tell the IRS about this? I'd rather not pay taxes.
Sugar daddy contributions are classified as "gifts" not income... regardless of what unsavory activities produced these "gifts". First 12k a year is 100% tax free.
Each?0 -
.........and I can't even beleive nobody answered my footlong question? Now I don't even know if I get to eat tomorrow. Wait six bucks, that's a little ceasars pizza and two tacos from jack in the box. but I was in the mood for a sandwich. *smh*0
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You hit a lot of items here,This is very useful. And very generous on your part.
1) If I close a credit card account, which has a high interest rate (the reason I want to close it) will my credit score decrease? This is my 1st credit card, and all my payments are on time, and have been paid off in the full amount.
2) How often should you check your credit score? Once a year, or twice a year?
3) With the economic meltdown, the number of student loans given out are significantly decreasing. In what ways can a student increase the chance/possibility of getting a loan? (In the $200K+ range)
Thank you.
You should always leave at least 1 credit line in your name open.
By having available credit you show worthiness. By keeping the balance on it minimal or unused it shows you have control of your finances.
You should check your report quarterly for accuracy and your score annually.
As for school loans that is a hornet's nest with everyone having different criteria.
Good credit history and the establishment you are going to attend in the US play heavily in the decision process.
Which is different with home loans where a 5 year average of income and credit history are the primary factors.0 -
I have a small 401k with my prior employer. Is it best to roll it over? Roth IRA? Where's a good place to do research? I've been a SAHM for a couple of years but plan to return to work in the next 6 months.0
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From the IRS website:
"Generally, the amounts an individual withdraws from an IRA or retirement plan before reaching age 59½ are called ”early” or ”premature” distributions. Individuals must pay an additional 10% early withdrawal tax and report the amount to the IRS for any early distributions, unless an exception applies."
http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---Tax-on-Early-Distributions
That link was just for the tax brackets in the U.S. Wasn't linking it for the early disbursement discussion.
Also, your link substantiated my claim. Scroll down to the Exception for Rollovers.
From the rollover section:
"in-plan Roth rollovers or eligible distributions contributed to another retirement plan or IRA within 60 days"
What that means is if it's either (A) Roth to Roth or (B) was contributed to a traditional plan within 60 days, there is no penalty. Otherwise there is for someone under 59 1/2. You're wrong here man. You can try and debate me all you want but I have handled many Roth conversions for clients. They pay the tax every time and, if they are under 59 1/2, they would pay a penalty as well.
And the original point of contention was:
[/quote]My understanding is that there is a limit to what you can set aside in a IRA or 401K. If you want to set aside more on a tax advantaged basis, you can use an insurance vehicle.There is a limit, which is fairly high. Though, you can also roll money over from a traditional to a Roth (if memory serves, I am not quite at this level yet).
True. However, doing so means you are taking a distribution from your traditional IRA and that money will be considered ordinary income in the year in which you do it. That means potentially a very large tax bill as well as penalties if you are under age 59 1/2.
I was only talking about using it as a way to roll money over each year to be able to contribute more than the normal limit for a Roth IRA. Which can be easily done using the 60 day window.
(However, I did not know that the penalty was incurred outside of the 60 day window when under 59 1/2, so you got that one.)0 -
I have a small 401k with my prior employer. Is it best to roll it over? Roth IRA? Where's a good place to do research? I've been a SAHM for a couple of years but plan to return to work in the next 6 months.
I would personally recommend rolling it over to a Roth IRA. The best place is to start learning what a 401k is and what a Roth is. Wikipedia or the government website for each one is a good spot. Just fan out from there.0 -
I have a small 401k with my prior employer. Is it best to roll it over? Roth IRA? Where's a good place to do research? I've been a SAHM for a couple of years but plan to return to work in the next 6 months.
Generally, yes, roll it over. You'll have more investment options and flexibility that way. Put it in a traditional IRA though because, if you roll it into a Roth, you will face taxes and possible penalties. On the other hand, if it's small enough, it might be worth paying those things. As I mentioned early in this thread, go walk into Schwab or Fidelity and ask for an appointment. They'll give you some guidance and will have your best interests in mind.
There are lots of places to do research online. Schwab, Fidelity, Ameritrade and Morningstar are some good ones. Also, Investopedia is a good resource for people who are just getting started in investing and explains things very well in plain English.0 -
Sorry man. You're wrong. I do this stuff every day. A withdrawal from an IRA - traditional or Roth - prior to the age of 59 1/2 will be subject to a 10% IRS penalty. The only common exception (and there are uncommon ones) is the rule of 72t in which a person takes substantially equal distributions for the longer of 5 years or attainment of age 59 1/2. The info you got off Fidelity is right, but it's incomplete.
Everything that I'm looking up says that there is no 10% penalty when rolling over from a Traditional IRA to a Roth IRA regardless of age. Source?
Um, you two are talking about two different things here. Rollovers are NOT withdrawals. A rollover will have no penalty, but a withdrawal will (assuming no 72 t or q)0 -
I have a small 401k with my prior employer. Is it best to roll it over? Roth IRA? Where's a good place to do research? I've been a SAHM for a couple of years but plan to return to work in the next 6 months.
Generally, yes, roll it over. You'll have more investment options and flexibility that way. Put it in a traditional IRA though because, if you roll it into a Roth, you will face taxes and possible penalties. On the other hand, if it's small enough, it might be worth paying those things. As I mentioned early in this thread, go walk into Schwab or Fidelity and ask for an appointment. They'll give you some guidance and will have your best interests in mind.
There are lots of places to do research online. Schwab, Fidelity, Ameritrade and Morningstar are some good ones. Also, Investopedia is a good resource for people who are just getting started in investing and explains things very well in plain English.
This.0 -
Sorry man. You're wrong. I do this stuff every day. A withdrawal from an IRA - traditional or Roth - prior to the age of 59 1/2 will be subject to a 10% IRS penalty. The only common exception (and there are uncommon ones) is the rule of 72t in which a person takes substantially equal distributions for the longer of 5 years or attainment of age 59 1/2. The info you got off Fidelity is right, but it's incomplete.
Everything that I'm looking up says that there is no 10% penalty when rolling over from a Traditional IRA to a Roth IRA regardless of age. Source?
Um, you two are talking about two different things here. Rollovers are NOT withdrawals. A rollover will have no penalty, but a withdrawal will (assuming no 72 t or q)
We just finished hashing it out.
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Sorry man. You're wrong. I do this stuff every day. A withdrawal from an IRA - traditional or Roth - prior to the age of 59 1/2 will be subject to a 10% IRS penalty. The only common exception (and there are uncommon ones) is the rule of 72t in which a person takes substantially equal distributions for the longer of 5 years or attainment of age 59 1/2. The info you got off Fidelity is right, but it's incomplete.
Everything that I'm looking up says that there is no 10% penalty when rolling over from a Traditional IRA to a Roth IRA regardless of age. Source?
Um, you two are talking about two different things here. Rollovers are NOT withdrawals. A rollover will have no penalty, but a withdrawal will (assuming no 72 t or q)
Converting from a traditional IRA to a Roth IRA IS considered a withdrawal from the traditional IRA. Rollover from traditional to traditional and Roth to Roth is not a withdrawal.0 -
Wow...I just read the last page of this post (page 5) and almost every answer on here is wrong or misguided. PLEASE don't follow advice on here. Most of it has been form bad internet sources with a complete misunderstanding of reality.0
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Wow...I just read the last page of this post (page 5) and almost every answer on here is wrong or misguided. PLEASE don't follow advice on here. Most of it has been form bad internet sources with a complete misunderstanding of reality.
Care to quote specifics man? Because no, I am not wrong OR misguided.0 -
Wow...I just read the last page of this post (page 5) and almost every answer on here is wrong or misguided. PLEASE don't follow advice on here. Most of it has been form bad internet sources with a complete misunderstanding of reality.
Bring it.0 -
Do you know anything about psychiatry?
NO. That is not allowed in the forums. Shame on you, Parmcat.0 -
Do you know anything about psychiatry?
NO. That is not allowed in the forums. Shame on you, Parmcat.
I defer to supah on all matters related to the mind.0 -
Sorry man. You're wrong. I do this stuff every day. A withdrawal from an IRA - traditional or Roth - prior to the age of 59 1/2 will be subject to a 10% IRS penalty. The only common exception (and there are uncommon ones) is the rule of 72t in which a person takes substantially equal distributions for the longer of 5 years or attainment of age 59 1/2. The info you got off Fidelity is right, but it's incomplete.
Everything that I'm looking up says that there is no 10% penalty when rolling over from a Traditional IRA to a Roth IRA regardless of age. Source?
Um, you two are talking about two different things here. Rollovers are NOT withdrawals. A rollover will have no penalty, but a withdrawal will (assuming no 72 t or q)
Converting from a traditional IRA to a Roth IRA IS considered a withdrawal from the traditional IRA. Rollover from traditional to traditional and Roth to Roth is not a withdrawal.
Sorry, sleepy and was reading this part after reading the 401k to IRA question! :blushing: For some reason I was thinking you were saying a 401k to IRA would have a penalty! Heh.
Briko... we've all worked or work in the financial industry. For 3 years it was my job to answer things like this. I can't/don't EVER give advice, but I have a pretty solid understanding of how things work, especially in the annuity business.0 -
I have a small 401k with my prior employer. Is it best to roll it over? Roth IRA? Where's a good place to do research? I've been a SAHM for a couple of years but plan to return to work in the next 6 months.
Generally, yes, roll it over. You'll have more investment options and flexibility that way. Put it in a traditional IRA though because, if you roll it into a Roth, you will face taxes and possible penalties. On the other hand, if it's small enough, it might be worth paying those things. As I mentioned early in this thread, go walk into Schwab or Fidelity and ask for an appointment. They'll give you some guidance and will have your best interests in mind.
There are lots of places to do research online. Schwab, Fidelity, Ameritrade and Morningstar are some good ones. Also, Investopedia is a good resource for people who are just getting started in investing and explains things very well in plain English.
This.
THANK YOU BOTH!0
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