<< <i>Transaction of $10K are more are required to be reported even if cash.
I do not believe this to be true. If I write you a check for a large batch of stuff, i.e. >$10K, there are no forms required. Unless, of course, you are considering the physical 'check' as a form.
Where's the good Capn when we need him to verify? >>
You are correct, all cash transactions of $10k or more are required to be reported by the seller (IRS Form 8300). Note however, that non-reportable electronic payments are easily traceable and should be considered readily available to IRS. Recent changes to the law make it very easy for government agencies (Homeland Security, IRS, etc.) to follow electronic money transactions. The upcoming requirement for paypal to report income to the IRS is one such result.
<< <i>My 401k is a joke, would have been better off putting cash under my mattress, and using the rest to buy PMs. Recently laid off and called Vanguard about cashing out and converting it to gold. 20% early penalty fee before taxes, then income tax for the money grubbing Gutment. I would get the crumbs, that's damn near 1/2 right off the top. >>
IRS requires 10% early withdrawal penalty, not sure your 401k manager can charge you 20%. Vanguard should still roll it over to a regular IRA of your choosing with no taxes and no penalty. Only when you convert it to a Roth or cash it out are taxes, and in your case, a penalty due to the IRS. Rolling it over to a self managed, regular IRA brokerage account will give you much more flexibility with a wide range of equities including non-physical PMs. Lot of talk lately about PM mining stocks showing good potential.
Fidelity Magellan Regular IRA. Had 2K in in for 10 years. Didn't move at all. Last year I transferred from their Magellan to their Fidelity Gold Fund. Up $700 this year. Only paper gold I own though.
<< <i>Fidelity Magellan. Had 2K in in for 10 years. Didn't move at all. Last year I transferred from their Magellan to their Fidelity Gold Fund. Up $700 this year. Only paper gold I own though. >>
As long as there are buyers paper is not a bad thing.
derryb's comments on rollover into an IRA are correct. Tax & penalty only when you cash out or go into a Roth. I'm not aware of any 20% penalty.
I've had a brokerage account linked to an IRA with both Vanguard and TRowe Price in the past, and they do give you nice flexibility, even to the point of buying individual stocks.
Even if you are successful in avoiding the creation of a paper trail, be 100% certain to keep your cost basis documented. Cash transactions are always good.
Q: Are You Printing Money? Bernanke: Not Literally
"you typically cannot convert a 401(k) to a Roth IRA while you are still working for the employer where your 401(k) is held." i have ~14 yrs before retirement.
<< <i>The simple answer: >>
"Many people cannot afford to pay the taxes due on a potential Roth IRA conversion. Unfortunately, although some of these people feel conversion is their best long-term financial strategy, they don't feel they can actually take advantage. If that sounds like you, there may be another answer: convert only the amount of your account on which you know you can comfortably afford to pay the tax. As long as you continue to be eligible to convert, you can continue to do a partial conversion year after year, never having to make that giant tax payment, yet gradually converting your retirement accounts to tax-free status."
<< <i>Many people cannot afford to pay the taxes due on a potential Roth IRA conversion. >>
When you convert to the Roth, take 25% of the withdrawal in cash to cover the approx. 25% in taxes and possible penalty. Taxes due on the full 401k withdrawal are due to the IRS on their next quarterly due date; you will face a penalty for underpayment if you wait til the end of the year. Taking the portion in cash affects your taxes due in no way since all of the conversion and all of the cash withdrawn are subject to the same taxes and penalty. Since you only deposited 75% of the 401k into the Roth you will need a 25% return on the Roth for its tax free balance to be the same dollar amount as your current taxable 401k balance. However, if you are in a 20% tax bracket and have approx. $83K in a tax free account it is the same as having $100k in a taxable account. You are going to pay taxes anyway on what is in your 401k when you withdraw it later, probably at a higher rate by then as Washington digs deeper into your pocket over time. What you are really sacrificing now to do the conversion is the 10% penalty. Good investments can make that up in little time. Also, all of your future gains are now tax free upon later withdrawal. Remember tax free money is worth much more than taxable money.
This plan is a no brainer as long as the new self managed brokerage Roth account investments are solid. The advantages are you are growing tax free money with investments that you fully control. You are free to sell the investments at anytime as long as the funds remain in the Roth as a cash balance. Then you can reinvest the funds at any time. The key is investments with a good future. If you have an invetment in mind (silver for me) that you feel is a money maker, advantages of the Roth far outweight advantages of the regular IRA. Both types are better than most 401k's, especially if you want control of the investments. I was fortunate to have made my Roth move with $23 silver and some good silver mining stocks. Keep in mind you current 401k may be locked into not so solid investments.
One thing to be aware of: Purchases made in any IRA brokerage account have to be made with settled funds. This is to keep IRA account holders from day trading. Upon the sale of an item, it takes a few days for funds to be settled. What this means is if you sell SLV from your IRA you have to wait a few days for the funds to settle before you can purchase something else with those funds. Scottrade is great about keeping me informed on the amount of settled funds I have available for trading. I am currently managing five different family IRA accounts with them, both regular and Roth.
Roth conversion is the only opportunity you have to deposit unlimited funds into the account. The only limit is the amount you have available to convert from a 401k or a regular IRA (also, the Thrift Savings Plan for federal employees). Normal contributions to the Roth or any IRA are limited annually based on your income. This conversion loophole was not designed for you and I. It was put in place as a tax loophole for the rich. Fortunately, loopholes apply to us all. The secret is knowing about them.
Always talk to a tax professional before making any retirement account decision. Your specifics will require specific advice.
<< <i>When you convert to the Roth, take 25% of the withdrawal in cash to cover the approx. 25% in taxes and possible penalty. >>
from ING (401-K) - i can convert a portion (~$13,xxx) to my roth w/o the 10% penalty, annually. paying those taxes now. they send a 1099 in Jan and said it was reportable income for the year (& not quarterly ??? )
i will be meeting with the CPA very soon to implement this plan
<< <i>When you convert to the Roth, take 25% of the withdrawal in cash to cover the approx. 25% in taxes and possible penalty. >>
from ING (401-K) - i can convert a portion (~$13,xxx) to my roth w/o the 10% penalty, annually. paying those taxes now. they send a 1099 in Jan and said it was reportable income for the year (& not quarterly ??? )
i will be meeting with the CPA very soon to implement this plan >>
Contributions to a Roth are made with money that has been taxed. That is why they are allowed to grow tax free. Contributions to a 401k or a regular IRA are made with untaxed (pretax) money. That is why later withdrawals get taxed.
Be clear on the penalty, it is an IRS rule. Rollovers to a regular IRA do not involve penalties since it is a non taxable event and you are just switching to a similar (pre-tax) account. With a conversion you are going from a pre-tax account to a taxed account, therefore the IRS wants their taxes on the amount converted since you didn't pay taxes on the money when you contributed it to the 401k or the regular IRA. Conversions to a Roth, before retirement age, are considered early withdrawals and are normally subject to the penalty. Talk to the 401k plan administrator first. You will need to know the options available with your particular plan before you talk to the CPA. 401k's are normally set up by the employer and differ among employers. He may even give you advance questions to ask your 401k administrator. Otherwise you will end up paying him to read your entire 401k plan agreement. Make sure you can withdraw some of the account in cash to pay the tax bill or be sure you have other funds to do it with.
While 1099s are not due until the end of the tax year, the IRS considers taxes on income due in the quarter earned. They have set four tax deadline dates for the year. Reason you have never experienced this is because payroll checks withhold taxes in a shorter period of time (weekly, bi-weekly). Failure to pay quarterly taxes will cause you to end up with a big tax bill to the IRS at the end of the year. Big amounts due at the end of the year usually face an additional penalty because they should have been paid quarterly. Talk to your CPA about this.
Also, if the amount you are converting is large enough to put you in a higher tax bracket for the year (it is considered taxable income for the year), consider doing the conversion in portions each tax year. Normally you can convert more than once from the same account. You can even have more than one IRA. I have two Roths and one regular.
Remember, the only way this works to your advantage is by making solid investments with the new account.
What derryb is saying is totally correct, in my experience. Slow down and absorb the info. You can also get good info from Vanguard or TRowe Price by requesting info on an IRA Rollover or a 401K Rollover, which will essentially tell you the same things.
My ex of 26 years is a CPA/Tax Attorney. You'd be surprised how tax considerations drive many many business decisions. Likewise, if you have any accumulated wealth savings at all, tax considerations will also drive many of your own decisions as time goes by and especially if the looters continue to control Congress for much longer.
Q: Are You Printing Money? Bernanke: Not Literally
Make sure you are clear on the difference between a rollover and a conversion. Convert to a Roth IRA (taxes due immediately, possible penalty due, tax-free retirement withdrawals) or rollover to a regular IRA (no taxes or penalty due immediately, taxed retirement withdrawals). Note that a regular IRA as well as a 401k can be converted to a Roth IRA.
A person living on an IRA would very much prefer the tax free income of the Roth.
You can even use some of the cash from the conversion to purchase physical, but I feel you are better off tax-wise getting as much as you can into the Roth so that all gains become tax free. Later sale of any physical metal will be taxed at the higher rate because it is considered a collectible by the IRS. Later sell of metal equities in a Roth are not taxed when withdrawn. The only taxes on a Roth take place when it is funded. With all brokerage IRAs there are no taxes due upon sale of equities (buy and sell as much as you like!). Any taxes due (non Roth IRA only) are on withdrawals upon retirement.
i can convert a small portion of my current 401k into my current roth, without a penalty, annually. (per ING) i will likely(hopefully) be at this job until retirement.
tax considerations will likely make or break this decision.
my goal is to increase the later(retirement) tax free withdrawals, now. (after considerable absorption) and some silver.
<< <i>i can convert a small portion of my current 401k into my current roth, without a penalty, annually. (per ING) i will likely(hopefully) be at this job until retirement.
tax considerations will likely make or break this decision.
my goal is to increase the later(retirement) tax free withdrawals, now. (after considerable absorption) and some silver. >>
Keep in mind you will be taxed on your 401k withdrawals either now with a conversion or later with retirement withdrawals. If possible, better to pay now and watch it grow tax free in a Roth.
Comments
<< <i>Transaction of $10K are more are required to be reported even if cash.
I do not believe this to be true. If I write you a check for a large batch of stuff, i.e. >$10K, there are no forms required. Unless, of course, you are considering the physical 'check' as a form.
Where's the good Capn when we need him to verify? >>
You are correct, all cash transactions of $10k or more are required to be reported by the seller (IRS Form 8300). Note however, that non-reportable electronic payments are easily traceable and should be considered readily available to IRS. Recent changes to the law make it very easy for government agencies (Homeland Security, IRS, etc.) to follow electronic money transactions. The upcoming requirement for paypal to report income to the IRS is one such result.
Exit bunker, enter Matrix. LOL
<< <i>My 401k is a joke, would have been better off putting cash under my
mattress, and using the rest to buy PMs. Recently laid off and called Vanguard
about cashing out and converting it to gold. 20% early penalty fee before taxes,
then income tax for the money grubbing Gutment. I would get the crumbs, that's damn near
1/2 right off the top. >>
IRS requires 10% early withdrawal penalty, not sure your 401k manager can charge you 20%. Vanguard should still roll it over to a regular IRA of your choosing with no taxes and no penalty. Only when you convert it to a Roth or cash it out are taxes, and in your case, a penalty due to the IRS. Rolling it over to a self managed, regular IRA brokerage account will give you much more flexibility with a wide range of equities including non-physical PMs. Lot of talk lately about PM mining stocks showing good potential.
Exit bunker, enter Matrix. LOL
Box of 20
<< <i>Fidelity Magellan. Had 2K in in for 10 years. Didn't move at all. Last year I transferred from their Magellan to their Fidelity Gold Fund. Up $700 this year. Only paper gold I own though. >>
As long as there are buyers paper is not a bad thing.
Exit bunker, enter Matrix. LOL
I've had a brokerage account linked to an IRA with both Vanguard and TRowe Price in the past, and they do give you nice flexibility, even to the point of buying individual stocks.
Even if you are successful in avoiding the creation of a paper trail, be 100% certain to keep your cost basis documented. Cash transactions are always good.
I knew it would happen.
i have ~14 yrs before retirement.
<< <i>The simple answer: >>
"Many people cannot afford to pay the taxes due on a potential Roth IRA conversion. Unfortunately, although some of these people feel conversion is their best long-term financial strategy, they don't feel they can actually take advantage. If that sounds like you, there may be another answer: convert only the amount of your account on which you know you can comfortably afford to pay the tax. As long as you continue to be eligible to convert, you can continue to do a partial conversion year after year, never having to make that giant tax payment, yet gradually converting your retirement accounts to tax-free status."
little by little
thanks for the info derryb!
<< <i>Many people cannot afford to pay the taxes due on a potential Roth IRA conversion. >>
When you convert to the Roth, take 25% of the withdrawal in cash to cover the approx. 25% in taxes and possible penalty. Taxes due on the full 401k withdrawal are due to the IRS on their next quarterly due date; you will face a penalty for underpayment if you wait til the end of the year. Taking the portion in cash affects your taxes due in no way since all of the conversion and all of the cash withdrawn are subject to the same taxes and penalty. Since you only deposited 75% of the 401k into the Roth you will need a 25% return on the Roth for its tax free balance to be the same dollar amount as your current taxable 401k balance. However, if you are in a 20% tax bracket and have approx. $83K in a tax free account it is the same as having $100k in a taxable account. You are going to pay taxes anyway on what is in your 401k when you withdraw it later, probably at a higher rate by then as Washington digs deeper into your pocket over time. What you are really sacrificing now to do the conversion is the 10% penalty. Good investments can make that up in little time. Also, all of your future gains are now tax free upon later withdrawal. Remember tax free money is worth much more than taxable money.
This plan is a no brainer as long as the new self managed brokerage Roth account investments are solid. The advantages are you are growing tax free money with investments that you fully control. You are free to sell the investments at anytime as long as the funds remain in the Roth as a cash balance. Then you can reinvest the funds at any time. The key is investments with a good future. If you have an invetment in mind (silver for me) that you feel is a money maker, advantages of the Roth far outweight advantages of the regular IRA. Both types are better than most 401k's, especially if you want control of the investments. I was fortunate to have made my Roth move with $23 silver and some good silver mining stocks. Keep in mind you current 401k may be locked into not so solid investments.
One thing to be aware of: Purchases made in any IRA brokerage account have to be made with settled funds. This is to keep IRA account holders from day trading. Upon the sale of an item, it takes a few days for funds to be settled. What this means is if you sell SLV from your IRA you have to wait a few days for the funds to settle before you can purchase something else with those funds. Scottrade is great about keeping me informed on the amount of settled funds I have available for trading. I am currently managing five different family IRA accounts with them, both regular and Roth.
Roth conversion is the only opportunity you have to deposit unlimited funds into the account. The only limit is the amount you have available to convert from a 401k or a regular IRA (also, the Thrift Savings Plan for federal employees). Normal contributions to the Roth or any IRA are limited annually based on your income. This conversion loophole was not designed for you and I. It was put in place as a tax loophole for the rich. Fortunately, loopholes apply to us all. The secret is knowing about them.
Always talk to a tax professional before making any retirement account decision. Your specifics will require specific advice.
Exit bunker, enter Matrix. LOL
<< <i>When you convert to the Roth, take 25% of the withdrawal in cash to cover the approx. 25% in taxes and possible penalty. >>
from ING (401-K) - i can convert a portion (~$13,xxx) to my roth w/o the 10% penalty, annually.
paying those taxes now. they send a 1099 in Jan and said it was reportable income for the year (& not quarterly ??? )
i will be meeting with the CPA very soon to implement this plan
<< <i>
<< <i>When you convert to the Roth, take 25% of the withdrawal in cash to cover the approx. 25% in taxes and possible penalty. >>
from ING (401-K) - i can convert a portion (~$13,xxx) to my roth w/o the 10% penalty, annually.
paying those taxes now. they send a 1099 in Jan and said it was reportable income for the year (& not quarterly ??? )
i will be meeting with the CPA very soon to implement this plan
Contributions to a Roth are made with money that has been taxed. That is why they are allowed to grow tax free.
Contributions to a 401k or a regular IRA are made with untaxed (pretax) money. That is why later withdrawals get taxed.
Be clear on the penalty, it is an IRS rule. Rollovers to a regular IRA do not involve penalties since it is a non taxable event and you are just switching to a similar (pre-tax) account. With a conversion you are going from a pre-tax account to a taxed account, therefore the IRS wants their taxes on the amount converted since you didn't pay taxes on the money when you contributed it to the 401k or the regular IRA. Conversions to a Roth, before retirement age, are considered early withdrawals and are normally subject to the penalty. Talk to the 401k plan administrator first. You will need to know the options available with your particular plan before you talk to the CPA. 401k's are normally set up by the employer and differ among employers. He may even give you advance questions to ask your 401k administrator. Otherwise you will end up paying him to read your entire 401k plan agreement. Make sure you can withdraw some of the account in cash to pay the tax bill or be sure you have other funds to do it with.
While 1099s are not due until the end of the tax year, the IRS considers taxes on income due in the quarter earned. They have set four tax deadline dates for the year. Reason you have never experienced this is because payroll checks withhold taxes in a shorter period of time (weekly, bi-weekly). Failure to pay quarterly taxes will cause you to end up with a big tax bill to the IRS at the end of the year. Big amounts due at the end of the year usually face an additional penalty because they should have been paid quarterly. Talk to your CPA about this.
Also, if the amount you are converting is large enough to put you in a higher tax bracket for the year (it is considered taxable income for the year), consider doing the conversion in portions each tax year. Normally you can convert more than once from the same account. You can even have more than one IRA. I have two Roths and one regular.
Remember, the only way this works to your advantage is by making solid investments with the new account.
Exit bunker, enter Matrix. LOL
My ex of 26 years is a CPA/Tax Attorney. You'd be surprised how tax considerations drive many many business decisions. Likewise, if you have any accumulated wealth savings at all, tax considerations will also drive many of your own decisions as time goes by and especially if the looters continue to control Congress for much longer.
I knew it would happen.
A person living on an IRA would very much prefer the tax free income of the Roth.
You can even use some of the cash from the conversion to purchase physical, but I feel you are better off tax-wise getting as much as you can into the Roth so that all gains become tax free. Later sale of any physical metal will be taxed at the higher rate because it is considered a collectible by the IRS. Later sell of metal equities in a Roth are not taxed when withdrawn. The only taxes on a Roth take place when it is funded. With all brokerage IRAs there are no taxes due upon sale of equities (buy and sell as much as you like!). Any taxes due (non Roth IRA only) are on withdrawals upon retirement.
Exit bunker, enter Matrix. LOL
i will likely(hopefully) be at this job until retirement.
tax considerations will likely make or break this decision.
my goal is to increase the later(retirement) tax free withdrawals, now. (after considerable absorption)
and some silver.
<< <i>i can convert a small portion of my current 401k into my current roth, without a penalty, annually. (per ING)
i will likely(hopefully) be at this job until retirement.
tax considerations will likely make or break this decision.
my goal is to increase the later(retirement) tax free withdrawals, now. (after considerable absorption)
and some silver. >>
Keep in mind you will be taxed on your 401k withdrawals either now with a conversion or later with retirement withdrawals. If possible, better to pay now and watch it grow tax free in a Roth.
Exit bunker, enter Matrix. LOL
<< <i>better to pay now and watch it grow tax free in a Roth. >>
exactly my motivation.
your information is golden!
im going to acquire (more) silver with it!