Author Topic: TIME TO TALK ABOUT ROTH CONVERSIONS  (Read 633 times)

offdalip

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Re: TIME TO TALK ABOUT ROTH CONVERSIONS
« Reply #15 on: January 17, 2010, 07:45:23 AM »
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The best retirement plan is investing in the next generation, now.  Pay attention to the next generation with time, money, and infinite tolerance.

Travel to other countries with the question, "Could this be a retirement refuge?"  And remember, we might have to go there sooner than we think.

Up until the 1960's this is what was traditionally done. The extended family then disappeared. I am not sure if the Millenials offer any hope for reviving this type of family. It is as Atash pointed out, highly infringed upon by govnmt
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Lady Lilya

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Re: TIME TO TALK ABOUT ROTH CONVERSIONS
« Reply #16 on: January 17, 2010, 09:26:02 AM »
Atash mentioned "granny daycare" as being discouraged because they want all transactions to be public and commercial. 

There is another reason too.  They want the kids institutionalized as early as possible. 

Here in NY, they are now starting (full-day) kindergarten at 4 (the year when they will turn 5, even though by law they don't have to attend until the year they will turn 6).  And they offer free public pre-k the year prior. 
If someone says something unkind about me, I must live so that nobody will believe it.

tigger

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Re: TIME TO TALK ABOUT ROTH CONVERSIONS
« Reply #17 on: January 17, 2010, 12:11:17 PM »
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You are only looking at the nominal gains........


In terms of actual buying power, if the rate of inflation is 5% then your actual buying power stays exactly the same. No gain. If the rate of inflation is over 5% then you end up with less than you started.

I wasn't worried about that.  That's a separate issue.

The point is that you ended up with the same amount in both cases - whether you paid the tax up front or later.  Your money isn't worth as much in the future (separate issue) but you end up with the same buying power in both cases.

Atash Hagmahani

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Re: TIME TO TALK ABOUT ROTH CONVERSIONS
« Reply #18 on: January 17, 2010, 03:14:22 PM »
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  Tax owed:  20% * $4321.94 = $864.39

More likely, you take your distributions as an income rather than all at once, as assumed in the calculation, and are taxed piecemeal. The balance continues earning (we hope), and distributions from those earnings are yet to be taxed.

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So, unless somebody wants to point out a flaw, I don't necessarily see that there are any tax advantages in the Roth

I don't so much "want" to point out a "flaw", as to point out an advantage that you are not yet aware of  :hug006::

Your calculations stop at theoretical retirement and you seemed to assume a lump-sum distribution. You were counting your "chicks" at retirement, rather than over your remaining lifespan after retirement. At retirement, the IRS requires you to make at least minimum distributions from your traditional IRA, under threat of a huge penalty. Your principal is still earning tax-deferred, but your distributions are now taxed and, if you re-invest them, their earnings are now taxed.

You can allow your Roth to keep growing...with earnings STILL tax-free. Bear in mind that late in the game is when the accounts are growing fastest, due to having the biggest principal working for you.

Damn.  :eatdrink004:  :hug004:

Live long and prosper, friend!  :hug006:
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Atash Hagmahani

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Re: TIME TO TALK ABOUT ROTH CONVERSIONS
« Reply #19 on: January 17, 2010, 03:32:55 PM »
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Atash mentioned "granny daycare" as being discouraged because they want all transactions to be public and commercial.

There is another reason too.  They want the kids institutionalized as early as possible.

Good observation. That's how they program us to have a livestock mentality.

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Here in NY, they are now starting (full-day) kindergarten at 4 (the year when they will turn 5, even though by law they don't have to attend until the year they will turn 6).  And they offer free public pre-k the year prior.

That trend has been going on for a while. They use crack-baby poster-children to make the case, but it impacts all of us, even if you don't take them up on their "free" service, you still pay for it, and it also creates the "creche-baby" mentality, that makes the rest of us look like nonconformist weirdos for wanting to raise our children a bit more naturally.

We put up with the dreaded stigma of "homeschooling" for decades. Now I am not looking forward to starting over, especially as the hysteria seems to be rising not falling. No wonder so many homeschoolers live out in the sticks. But you really can't hide.

I would guess my current neighborhood would be more hostile to homeschooling than the last. A lot of the neighbors don't like us anyway, and the "culture" here is different--a lot of highly indoctrinated busybodies here.

For those who are not aware, "school" creates an extremely un-natural environment where:

* children are age-segregated. It creates a self-reinforcing group age-norm, that stunts their maturity. In real life in the "ancestral village", there are older and younger kids around, not to mention adults who are related to you and take a personal interest in you (the day-care staff don't).
* activities (such as they are) encourage intellectual passivity. You get approval for being quiet, and staring at the teacher and pretending that you're listening.
* You almost could not design the instruction any worse. The right order in which to do things is to have the kids read the lesson themselves first, try to do the homework problems, and then talk about the lesson in class the next day. It also makes more sense to start with generalities, and flesh out the details later. Instead, the teachers lecture class one day and have the kids do unrelated "application and integration" homework at night (Benjamin Bloom's idea) hours after they have forgotten the lesson they weren't really all that involved in in the first place. This is essentially perfectly backwards from the way our brains work.

Bloom by the way was a card-carrying commie, doing research on how to train the livestock to be livestock.
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offdalip

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Re: TIME TO TALK ABOUT ROTH CONVERSIONS
« Reply #20 on: January 17, 2010, 05:54:11 PM »
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You can allow your Roth to keep growing...


Dude,.... that's a huge fallacy.


you are ASSUMING GROWTH.

that is not a given at all!

sure 1980 - 2000 had growth across the board. but without cheap energy , have we had any growth lately or going forward?

I suspect arbitrage will be a better way to increase the value of your IRA rather than growth going forward.......
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Atash Hagmahani

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Re: TIME TO TALK ABOUT ROTH CONVERSIONS
« Reply #21 on: January 17, 2010, 06:27:08 PM »
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you are ASSUMING GROWTH.

Keep your shirt on, bro.  :hug006: Not assuming "capital gains" if that's what you mean by "growth".

When the money supply is growing, AND so is the economy, then you get capital gains. When the economy is shrinking, and the money supply is probably exploding (monetizing debt while the economy is actually shrinking), you get false capital gains and net REAL losses...

However, you could invest your money wisely creating an income out of precisely the things we will have shortages of. THAT is the "growth" that I am looking for. I did not mean that as a synonym for capital gains--I am too shrewd and too cautious to fall for that. :happy112:

I suggest minimum buying and selling, because it will generate false TAXABLE capital gains.

Does that make better sense?  :hug010:
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tigger

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Re: TIME TO TALK ABOUT ROTH CONVERSIONS
« Reply #22 on: January 17, 2010, 09:56:38 PM »
OK, so required minimum distributions (RMDs -- I wonder if these are thought to be similar in badness to WMDs) also favor the Roth.  That's a good point and is also why I said Roth has "other advantages".  The point was just that being taxed up front or taxed when you withdraw is effectively equivalent.  What's important is which has the higher rate and the future rate is always unknown.

Now, your other point is probably worth another discussion.  So, say you can buy some real estate in your IRA.  The Roth has the RMD advantage *but* you'd be able to get a lot more real estate if it were in a tax-deferred account (you have more money because it hasn't been taxed yet).  Because of the large numbers involved, it could be that something you could afford in a tax-deferred account just isn't affordable in a Roth.  But, I guess a non-Roth would be a lot more difficult and maybe impractical when you actually try to pull something out of it.

Atash Hagmahani

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Re: TIME TO TALK ABOUT ROTH CONVERSIONS
« Reply #23 on: January 17, 2010, 11:51:29 PM »
This is something true of any type of IRA:

You can buy real estate with leverage. I do not suggest that you use much leverage, because it adds risk, but a small amount of leverage would make up for the small starting differential between a Roth and a traditional.

Personally, I'm not using any leverage, because it adds risk un-necessarily for accomplishing my goals.
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Mike

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Re: TIME TO TALK ABOUT ROTH CONVERSIONS
« Reply #24 on: January 18, 2010, 02:25:50 AM »
It's a sad commentary on our nation that these finance & tax considerations are worthwhile,..... and that the best and brightest don't agree confirms the sad state.

offdalip

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Re: TIME TO TALK ABOUT ROTH CONVERSIONS
« Reply #25 on: January 18, 2010, 06:53:05 AM »
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However, you could invest your money wisely creating an income out of precisely the things we will have shortages of. THAT is the "growth" that I am looking for. I did not mean that as a synonym for capital gains--

yep, I just didn't want people to get the ideas confused and think that they were going to get "growth" like they have had in the past


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I suggest minimum buying and selling, because it will generate false TAXABLE capital gains.

buying and selling is irrelevamt in any IRA, if you are taxed it is the cummulative gain not the number of trades.

That's why I said IRA's are best suited for short term arbitrage situations,
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"Events can move from the impossible to the inevitable without ever stopping at the probable"

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse...."

 

anything