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Contribute to Roth IRA in retirement year?
Old 01-02-2015, 02:03 PM   #1
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Contribute to Roth IRA in retirement year?

As the title says, should you contribute to your Roth IRA in your retirement year? Quick facts, this would be the 2014 contribution, and I guess you could weigh in on doing a 2015 contribution but I'm pretty sure that isn't going to happen. I plan to work 6 months this year. I should almost max out the 401K contribution limit--rest is going into a stock purchase plan that looks to be about a 20% net (not yearly) return when I leave. Payments to the stock plan are taxable but if I hold the stock for 1 year it is considered long term gain so only 15% tax rate on gains. Stock has been paying 2-3% dividends reliably as well.

I just don't see any real gain to put money into the Roth IRAs and then start doing withdrawals the same year. I might have cash if I shuffle some accounts to do a deposit at the start of the year but the gains would be very minor for 6 months and we are basically going to be running on zero salary for those 6 months after maxing out those two items.
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Old 01-02-2015, 04:43 PM   #2
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What is your age? If over 59.5 or over 55 and plan allows, you can tap your 401k with out 10% penalty.

I am 56 and retired in 2014. My 401k was terminated so I rolled into my tira. I am over deductible tira limit for 2014 and plan to contribute to my roth as I did last year. I have sufficient taxable savings.

The tax free growth is too attractive to pass on.
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Old 01-02-2015, 04:46 PM   #3
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Money going into a Roth IRA needs to stay there 5 years.

Right now, I'm sitting on large tax paid cash. I'm going to fund Roth IRA's (ETF's) for myself and my wife as we don't anticipate needing the money until later. And we're not going to touch our 401k funds until we're 70 1/2 years old and required to make withdrawals.
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Old 01-02-2015, 04:55 PM   #4
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Originally Posted by Bamaman View Post
Money going into a Roth IRA needs to stay there 5 years.

Right now, I'm sitting on large tax paid cash. I'm going to fund Roth IRA's (ETF's) for myself and my wife as we don't anticipate needing the money until later. And we're not going to touch our 401k funds until we're 70 1/2 years old and required to make withdrawals.
You should consider converting some or all of the 401k to roth ira before rmd's hit and or before taking ss.
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Old 01-02-2015, 06:10 PM   #5
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Money going into a Roth IRA needs to stay there 5 years.

.
Contributions can be withdrawn at any time. Conversions need to stay there 5 yrs .........(or more or less to avoid penalties depending on age when withdrawn).
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Old 01-03-2015, 11:17 AM   #6
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What is your age? If over 59.5 or over 55 and plan allows, you can tap your 401k with out 10% penalty.

I am 56 and retired in 2014. My 401k was terminated so I rolled into my tira. I am over deductible tira limit for 2014 and plan to contribute to my roth as I did last year. I have sufficient taxable savings.

The tax free growth is too attractive to pass on.
I'll be 51 at retirement. I understand about the tax free growth but most of my funds will be in either Roth or rollover IRAs. Liquidating the stock outside the accounts will hit me with capital gains taxes. So, I will likely start drawing on the Roth accounts immediately. The funds I move into them Roth at the start of the year would come out by the end of the year.
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Old 01-03-2015, 11:22 AM   #7
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Money going into a Roth IRA needs to stay there 5 years.
Subtle thing but it makes a big difference--
My understanding is that the Roth must have been established over 5 years ago to allow you to take the contributions out without tax or penalty. In an extreme view this would mean if you started the Roth account over 5 years ago, you could put funds in one month and take them out the next.

As you phrased it, we would have to track how much went in each year and could only pull out the funds that were deposited 5 or more years ago. i.e. contributions for the last 4 years are not accessible without taxes and penalties.

Anyone know which it is? I think it is the first. The second one adds a lot of record keeping that I don't think most people keep track of.
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Old 01-03-2015, 11:25 AM   #8
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Originally Posted by ArkTinkerer View Post
Subtle thing but it makes a big difference--
My understanding is that the Roth must have been established over 5 years ago to allow you to take the contributions earnings out without tax or penalty.
Contrubutions can be withdrawn at any time without penalty.

The Five Year Rule With Roth IRA Withdrawals
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Old 01-03-2015, 11:26 AM   #9
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Contributions can be withdrawn at any time. Conversions need to stay there 5 yrs .........(or more or less to avoid penalties depending on age when withdrawn).

Similar to my previous post. Are you sure of this? Based on this, yearly conversions from my rollover IRAs to the Roth accounts will have to age 5 years before I can tap those funds? My intent in retirement is to do conversions at the end of each year of as much as I can while staying in the 15% bracket.
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Old 01-03-2015, 11:28 AM   #10
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Google is an amazing tool...
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Old 01-03-2015, 11:28 AM   #11
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Contrubutions can be withdrawn at any time without penalty.

The Five Year Rule With Roth IRA Withdrawals

Thanks! from the link--

"However, this is not the case with a Roth IRA conversion; the five year rule clock restarts with every conversion with the amount and date it was converted."
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Old 01-03-2015, 11:30 AM   #12
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Missed the "conversion" status in your question:

Quote:
If you take a distribution from the conversion money in your Roth IRA within five years after the conversion, the early distribution penalty will apply even though the distribution isn’t taxable.

Distributions After a Roth IRA Conversion - Fairmark.com Fairmark.com
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Old 01-03-2015, 11:45 AM   #13
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Your form 5498s that you receive mid year should contain records of all your conversions. This may be useful for those that did not realize that you need to keep track of a separate 5 year clock for each conversion and wish to take distributions before age 59 1/2.

You can receive copies of the last 10 years of your 5498 forms for free from the IRS.

-gauss
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Old 01-03-2015, 11:49 AM   #14
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Missed the "conversion" status in your question:
My fault. I didn't cover this in the initial information. Didn't know enough to realize they were treated differently!
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