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Old 03-02-2012, 12:29 PM   #21
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+1



OTOH, Fidelity really did a good job of both the rollovers and conversion. And this year I decided to move the Vanguard monies into the Fidelity acct, it was totally painless and so fast.

That being said, I have yet to find an advisor in any of these companies who can give me much valuable investment advice. I have spent years learning about how to handle my money and investments, learning from my own mistakes. The advisors I have spoken with have not added value to my decisions.

So, if I were the OP I might listen to the advisor but I would do what I felt was best for me.


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Pretty much captures our experience with Vanguard and Fido--Vanguard offers great funds with low cost, but TERRRIBLE administrative abilities and limited CSR ability to operate outside their standard script.
I have found our Fido rep valuable in not only facilitating unusual transactions but also being very knowledgeable how to use the many Fido tools available online. When she does not know, she always tells me (a valuable attribute IMHO) but always goes away and gets me the answer in a timely manner.
Investment advise is helpful in the sense of a sounding board but rarely offers specific insight into taking a different direction. I will say, however, she gets credit for nudging from leaving too much in cash too long several years ago when we had home sales proceeds parked too long.
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Old 03-02-2012, 12:42 PM   #22
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In trying to figure out what to do with my $385k FIDO 401K, I met with one of their reps today about possibly moving the 401K to an IRA. There are many good reasons to do this, but my primary one was to take advantage of the next few years when I'll be living off savings and have no income other than a few thousand in dividends. It seemed like the perfect opportunity to do some ROTH conversions with little to no taxes due.

I was shocked that the adviser didn't think it was worth my time to convert. She also seemed to think I'm too focused on the "little" things like expense ratios and keeping taxes low. I said I wanted to do a spreadsheet to compare the expense ratios of the available 401k funds vs. IRA funds and she gave me a look like I was out of my ever lovin' mind.

Please tell me I'm not crazy! (Or if I am, I guess I should know that, too).
Like others, I think you would be crazy NOT to do Roth conversions while you are in a low tax bracket and reduce RMDs later in life that might be subject to higher taxes.

I wonder if your FA is clueless.

It might well be that the ER differences between the 401k and IRA are not horribly significant, but the tax difference probably would be.
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Old 03-02-2012, 01:14 PM   #23
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Sorry to go OT, but in addition to the noted reasons why/why not rolling over your 401(k) to an IRA in retirement is the inability (at least in DW/my respective 401(k) plans, from different companies) to have your distributions go directly to cash (e.g. an IRA MM account) rather than reinvested in the fund issuing the distribution or have to do a manual exchange (buy/sell) to capture the distribution.

For instance, our respective bond funds in our IRA's distribute monthly, which go directly to cash for current/retirement income needs.

DW's 401(k) - and mine before converting, did not allow this option, so what I'm noting may not be your situation.

It's OK while still in the accumulation phase and for those that have other income sources while retired but for one who is using their portfolio to support their ER, it is a pain to sell funds to reap the distribution - and subject to market flux.

DW will retire at the end of this month. She intends to do a rollover as soon as her semi-monthly matching funds are posted - sometime early next month, when she starts getting her "paycheck" from her investments, rather than employment and be able to capture those distributions.

FWIW, we don't "cash in" all fund distributions. For instance, our (Psst) Wellesley holding (in our respective Roth IRA's) have quarterly distributions reinvested. Unlike Alan (who uses the same fund distributions for current income), we are just "letting it ride" with the expectation of never needing to use the fund (unless needed to mitigate excessive income taxes in the future).
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Old 03-02-2012, 01:23 PM   #24
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Lots of views here, did anyone remind OP that when you do a conversion from tIRA to Roth that you have to take into account all IRAs not just this one, for taxes. If you have deductable and non deductable, say 90K deductable and 10K non, then you pay taxes on 90% of withdrawls or conversions.

I'm sure others will correct me soon if I understand it wrong, but it can be a hassle if you have to dig out records from many many years ago.

Is it possible to convert say 10K from a 401K directly to a Roth IRA and bypass the deductable/non-deductable thing?
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Old 03-02-2012, 03:42 PM   #25
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Lots of views here, did anyone remind OP that when you do a conversion from tIRA to Roth that you have to take into account all IRAs not just this one, for taxes. If you have deductable and non deductable, say 90K deductable and 10K non, then you pay taxes on 90% of withdrawls or conversions.
and therefore if you do have a TIRA that is mostly non deductable it should be converted to the roth before the 401K is rolled to a TIRA so you dont have to pay as much tax on that conversion.

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Is it possible to convert say 10K from a 401K directly to a Roth IRA and bypass the deductable/non-deductable thing?
no
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Old 03-02-2012, 04:30 PM   #26
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Lots of views here, did anyone remind OP that when you do a conversion from tIRA to Roth that you have to take into account all IRAs not just this one, for taxes. If you have deductable and non deductable, say 90K deductable and 10K non, then you pay taxes on 90% of withdrawls or conversions.
I'm going to have to look into this. We have two large deductible rollover IRA's from 401k's and two non-deductible TIRA's (both with only non-deductible contributions, but gains taxable on withdrawal). I was assuming I might one day convert the latter if not all four to Roth IRAs during years with no/low income. Maybe I'm mistaken on my options...
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Old 03-02-2012, 04:58 PM   #27
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Originally Posted by Zantastic View Post
In trying to figure out what to do with my $385k FIDO 401K, I met with one of their reps today about possibly moving the 401K to an IRA. There are many good reasons to do this, but my primary one was to take advantage of the next few years when I'll be living off savings and have no income other than a few thousand in dividends. It seemed like the perfect opportunity to do some ROTH conversions with little to no taxes due.

I was shocked that the adviser didn't think it was worth my time to convert. She also seemed to think I'm too focused on the "little" things like expense ratios and keeping taxes low. I said I wanted to do a spreadsheet to compare the expense ratios of the available 401k funds vs. IRA funds and she gave me a look like I was out of my ever lovin' mind.

Please tell me I'm not crazy! (Or if I am, I guess I should know that, too).
I certainly don't think tax considerations are a little thing when talking about a Roth conversion especially if you think you'll be in a zero to 15% bracket now and a higher bracket latter.

However I might understand the comment in general about being too concerned with taxes (especially in regards to taxable accounts and funds to put there which is different than the 401K vs. Roth IRA conversion) and expense ratios. The tax efficiency (if in a taxable account) and expense ratio are something I look at when determining which funds to invest in - but not the only ones. My first priorities in looking for funds is to ensure my overall diversification is what I'm looking for. Then I look at overall return (net of expenses and taxes) for a fund compared to benchmarks and other funds in the same category. I also look at risk/reward history for the fund - if the fund is volatile - was the long term return worth it?
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Old 03-02-2012, 05:16 PM   #28
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and therefore if you do have a TIRA that is mostly non deductable it should be converted to the roth before the 401K is rolled to a TIRA so you dont have to pay as much tax on that conversion.
This is exactly what I did. The year I ER'ed I converted my tIRA (that was completely funded with after tax money). The following year I did the 401k rollover

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I'm going to have to look into this. We have two large rollover IRA's from 401k's and two non-deductible TIRA's (both with only non-deductible contributions, but gains taxable on withdrawal). I was assuming I might one day convert the latter to Roth IRAs during years with no/low income. Maybe I'm mistaken on my options...
The rollover IRA's are included in the calculation when doing a rollover. you can't choose which one.
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Old 03-02-2012, 06:59 PM   #29
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have you ever been sued? and if so, were you protected by ERISA or whatever it is called?
No, but I do remember the attorney at our retirement seminar mentioning this, plus 100% of your 401K is safe vs 100K in an IRA, even from creditors...though most of us don't have to worry about creditors.

Is a Retirement Plan Safe From a Law Suit? | eHow.com
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Old 03-02-2012, 07:32 PM   #30
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I'm going to have to look into this. We have two large deductible rollover IRA's from 401k's and two non-deductible TIRA's (both with only non-deductible contributions, but gains taxable on withdrawal). I was assuming I might one day convert the latter if not all four to Roth IRAs during years with no/low income. Maybe I'm mistaken on my options...
Original poster is correct, IRS treats all your IRAs is one. I believe pub 590 is where to look.
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Old 03-02-2012, 08:37 PM   #31
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Thanks for all of your replies! It's good to know that I'm not fundamentally crazy. Figuring out the best plan for me is giving me a stomach ache though.

What's the feminine version of the word "wuss"? I should change my username to whatever that is.
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Old 03-02-2012, 08:49 PM   #32
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What's the feminine version of the word "wuss"? I should change my username to whatever that is.
La_wuss ?
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Old 03-02-2012, 08:49 PM   #33
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Original poster is correct, IRS treats all your IRAs is one. I believe pub 590 is where to look.
TJ
Inherited IRAs excepted. For some reason these are not included in the tax calculations. I was able to convert my TIRA (after taxes) to Roth w/o incurring taxes as my other IRA is an inherited IRA and not subject to the conversion calcs.
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Old 03-02-2012, 08:55 PM   #34
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Inherited IRAs excepted. For some reason these are not included in the tax calculations. I was able to convert my TIRA (after taxes) to Roth w/o incurring taxes as my other IRA is an inherited IRA and not subject to the conversion calcs.
I didn't know that

Presumably that is because you have to take RMD's on inherited IRA's if you are not the spouse of the deceased. Or does this rule also apply to a spouse that has inherited an IRA and treats it as their own?
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Old 03-02-2012, 09:05 PM   #35
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I'm guessing the exception for inherited IRAs is due to the fact that you are not allowed to convert them to Roth IRAs.
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Old 03-02-2012, 09:08 PM   #36
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I'm guessing the exception for inherited IRAs is due to the fact that you are not allowed to convert them to Roth IRAs.
+1

Or roll them over into any other IRA.
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Old 03-02-2012, 09:34 PM   #37
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I didn't know that

Presumably that is because you have to take RMD's on inherited IRA's if you are not the spouse of the deceased. Or does this rule also apply to a spouse that has inherited an IRA and treats it as their own?
I inherited the IRA from my father and have to take RMD's based on my age (feels really weird!). I don't know how it would apply to spouse.
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Old 03-02-2012, 09:51 PM   #38
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I inherited the IRA from my father and have to take RMD's based on my age (feels really weird!). I don't know how it would apply to spouse.
Thanks for the clarification.

If you inherit an IRA from your spouse you have the option to roll it over into your own IRA. Michael is most probably correct that inherited IRA's cannot be converted to a ROTH.

Inherited IRA | IRA Distributions | Strecth IRA | IRA Rules
http://www.irs.gov/pub/irs-pdf/p590.pdf
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Old 03-02-2012, 10:35 PM   #39
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I set up a non-deductible IRA several years ago with the thought of converting it to a Roth, since I had no other avenue to get a Roth. Have not done a conversion yet. Tax rate is too high. At some point the tax rate should be low enough for me to reconsider if things are structured right. Still..as others have said, one has to include all the monies in all IRA's and come up with a percentage of the dollars converted which are then taxed. Had I known this at the time, not sure I would have set up the non-deductible IRA since it was already funded with after tax money. Oh well...at least perhaps I'll have some options going forward. One year at a time.
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Old 03-03-2012, 05:08 AM   #40
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"Have you talked with a tax person? Our CPA told us converting is not a good idea because of our tax bracket. That advice may change once we both stop working"

DITTO! On a Smaller Scale? Coverting my Little $25k IRA $ into my Roth? Would cost me 25% taxes = $6,000 For what? Nottin Honey! And It making 7% yr? How long to make that $6k back on that balanced of $19k? almost 4.5 yrs !
Throw in min. 3% Inflation and now it will take how long to get back to my $25k making 7% Yr in the IRA?

Actually? Am Glad I focused on Putting my Savings into a ROTH all these Yrs and Not a IRA..
I knew IRA's were a Bait and Switch Deal and a Conspiracy..
And of course MFunds Want people to Use IRA's and Roths! They don't move the $ around in them or In/Out as Much and they can Make More $ on them in Expenses..!
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