tax fun

[asthran]

So, apparently I can recharacterize some of my IRA contributions from last year, amend my return, and get an additional $400 back from the IRS.... It would also result in an account maintainance fee of $10/year for the next few years, most like, and then I'd have to deal with having both a traditional IRA and a Roth... So, question is, do I want to go through the bother, or would I rather have all my money be tax free?

Comments

[marlowe1.livejournal.com]

Of course you do. Especially since you can do it yourself. BTW, my account got me a $2000 refund for last year. I was shocked. I like accountants.

[klari.livejournal.com]

Putting more money in the market more quickly is better for retirement. More time in the market yields more interest. :-)

[asthran.livejournal.com]

It is all "in the market," and would still be in the market, it's just some would be in a traditional IRA, instad of all in a Roth.

Roth IRA, the money grows tax free, and distributions would be tax free as well. Traditionals are only tax-defered, so I'd pay taxes on the money I withdraw after I'm 59 1/2.

[heliodromos.livejournal.com]

Hmmm...I personally prefer to take the tax hit now, when I'm in a lower bracket, rather than wait and have to dock at least 10% of every distribution later on. Who knows what inflation will do over the next 50 years, so I'd rather have more money to work with at the end.

But what I need to know is what firm has the $10 annual maitainance fee?

[klari.livejournal.com]

Got it. I was unclear on your problem definition. I'd say then that you should look at which funds you would be choosing for the traditional IRA vs. the Roth IRA and based your decision on that, $400 is nice, but a drop in the bucket in the long run. Then again, I am like a skunk giving advice to a perfumer, so feel free to ignore all my advice, but let me know what you choose as I am always looking for more information on this stuff.

[socraticlaughtr.livejournal.com]

You'll have to explain this to me, and see if I can do it.

Hey! You'll be around next tax time, maybe I'll let you rilfe through my records...

[asthran.livejournal.com]

Vanguard, if you have an IRA with under 5k (in any given fund?), and total assets in Vanguard under 50k, if I understand their website correctly.

[asthran.livejournal.com]

Moving expenses I bet, right? And an education credit/deduction?

[asthran.livejournal.com]

If you want me to, I certainly can.

Roth IRAs are the best thing ever. Especially if the IRS doesn't change their mind on them.

Right now, if I can sock 20k into my IRA, and let it sit there for 40 years or so, and it grows to 200k, then none of that money will be taxed when I take it out.

There are some pundits who expect the IRS to change the rules and make the Roth IRA earnings taxable at some point, but I'm an optimist. And it's not like Social Security will be around.

[asthran.livejournal.com]

Oh, hey, I guess I never got back to you on this, didn't I?

I decided to not amend, and keep the money in the Roth.

Mostly, it was just because of the hassle: First, I'd need to contact Vanguard and do the paperwork to set up a Traditional (which I will need to do eventually, when I roll over my profit sharing from MarketLine Research, but still...), recharacterize $1000 of the Roth, amend my Federal tex return, and possibly my Minnesota returns also. Then, after I've eventually rolled over the PS stuff from MLR next year, I would get to convert the (then) $2k or so back into a Roth IRA, and get taxed on it all over again.

So, I figured, meh. I'll roll over the one when it becomes necessary, and not give myself the added hassle.

Make sense?

[asthran.livejournal.com]

erm... although, I guess if the hassle of the amended tax returns hadn't been there, and I could have just snapped my fingers and had everything done with little bother, I would have, since it would all have ended up as a Roth eventually anyway.

Although I should check and see if there's a five-year rule or something like that for conversions from Traditionals to Roths. Even if so, it still would have ended up as a Roth, it just might not have been until 2010.