2017 Estimated end of year Distributions for Mutual Funds - some already published

[RunningBum]

OK, I did another search and found VG's 2016 year end estimated distributions. The per share amount for Total Intl was net of taxes, so in estimating what will show on 1099-DIV you'll have to factor in foreign taxes on top of the three quarters already distributed, plus the estimated 4th quarter. Just as people said here.


Also, these really are just estimates. VTIAX estimated $.20 per share, and was actually $.209. VTSAX was estimated at $.32, but the actual was $.354 per share. The latter seems like a surprising amount off. At this point in the year I wouldn't expect any new dividend declarations announced with increases that still take place this year.


I guess it's just a matter of staying well away from any cliffs until after dividends are all distributed, and even then you have to conservatively guess how much is added in international fund dividends in the form of foreign taxes paid. I'd promise not to do the Roth conversion horse race again if they'd let me do small recharacterizations to not fall over the ledge.

 

[Trooper]

... and with Roth recharacterizations likely going away, it's more and more important to estimate as accurately as possible.

This whole gross-up thing has surprised me in the past, but given that I had the ability to recharacterize as much as I wanted it was no big deal. Looks like that's changing.

Thanks for the heads up on the potential elimination of recharacterizations. It caused me to do a search on this forum and I got the info needed, although looks to be still pretty vague. Will have to sharpen my pencil to get my conversion amount as close as possible (to the top of the 15% bracket) in the event recharacterizations get zapped.

 

[Helen]

Ouch... can you sell it on Monday and then wait until it goes ex-dividend?

I will have to see if there is a penalty for a short term holding. I'm moving my Vanguard accounts to Fido and thought I would skirt the $75 fee by buying before moving the account.

 

[pb4uski]

.... I'd promise not to do the Roth conversion horse race again if they'd let me do small recharacterizations to not fall over the ledge.

Yes, the horse race aficionados ruined it for the rest of us... I'd like to see them limit recharactrizations to $1,000... it would make the horse race not worth the effort but still allow us who want to dial in our Roth conversions to do so... it seems most likely that they just go away though.

 

[GrayHare]

Yes, the horse race aficionados ruined it for the rest of us... I'd like to see them limit recharactrizations to $1,000... it would make the horse race not worth the effort but still allow us who want to dial in our Roth conversions to do so... it seems most likely that they just go away though.

With recharacterizations disallowed starting in 2018, how will over-contributing and over-converting to Roth IRA be rectified? I've looked but yet to see any penalty mentioned.

 

[Alan]

With recharacterizations disallowed starting in 2018, how will over-contributing and over-converting to Roth IRA be rectified? I've looked but yet to see any penalty mentioned.

IIRC the one time I over contributed to a Roth I had the excess returned to me plus a statement of the gain the extra contribution had made since that was taxable.

I don’t think there is a limit on conversions to a Roth.

 

[catotx]

I will have to see if there is a penalty for a short term holding. I'm moving my Vanguard accounts to Fido and thought I would skirt the $75 fee by buying before moving the account.

There is no short term penalty at Vanguard, but you won't be able to buy it again within 30 days (unless you use the backdoor by scheduling it as a periodic investment).

 

[pb4uski]

With recharacterizations disallowed starting in 2018, how will over-contributing and over-converting to Roth IRA be rectified? I've looked but yet to see any penalty mentioned.

For excess contributions it will be a 6% penalty like it has been until the excess contributions are removed.... so I guess they will need to allow recharaterizations of overcontributions.

This is a 6% tax you're required to pay each year the excess contribution remains uncorrected. For example, suppose you made a $5,500 contribution to a Roth IRA early in 2014, then got a larger bonus than you expected and found that due to the income limitation your permitted contribution was only $4,300.

For excess conversions you'll just pay a higher tax rate on the excess.... in my case 30% as the excess will be taxed at 15% ordinary rates and will push some capital gains into the 25% tax bracket where they will be taxed at 15% as well.... so 30% in total.

 

[pb4uski]

There is no short term penalty at Vanguard, but you won't be able to buy it again within 30 days (unless you use the backdoor by scheduling it as a periodic investment).

You can also re-buy by mail.

https://www.bogleheads.org/wiki/Frequent_trading_policy

 

[SecondCor521]

Yes, the horse race aficionados ruined it for the rest of us... I'd like to see them limit recharactrizations to $1,000... it would make the horse race not worth the effort but still allow us who want to dial in our Roth conversions to do so... it seems most likely that they just go away though.

My idea would be to allow additional conversions from 1/1 through 4/15 that count as income for the previous year, analogous to the way one can make an IRA contribution that counts for the previous tax year.

That way you could make most of the conversion in the fall and then "top it up" in the spring once you get all the other tax forms.

It would prevent the Roth horse race and still allow people like us to dial things in. Admittedly only in one direction, but better than what we're likely to end up with.

 

[pb4uski]

I like that idea too.

 

[RunningBum]

My idea would be to allow additional conversions from 1/1 through 4/15 that count as income for the previous year, analogous to the way one can make an IRA contribution that counts for the previous tax year.

Yep, that would work just fine too.

 

[43210]

My idea would be to allow additional conversions from 1/1 through 4/15 that count as income for the previous year, analogous to the way one can make an IRA contribution that counts for the previous tax year.

That way you could make most of the conversion in the fall and then "top it up" in the spring once you get all the other tax forms.

It would prevent the Roth horse race and still allow people like us to dial things in. Admittedly only in one direction, but better than what we're likely to end up with.

Huh? I don't think you can do conversions from 1/1 through 4/15 in the following year. Contributions, yes. Conversions, no. You need to do conversions by 12/31 of the tax year, which is still useful to tweak _AGI. Correct me if I'm wrong.

 

[pb4uski]

You are right... we were discussing possible changes to allow those of us who like to dial Roth conversions to the top of a tax bracket to continue to do so once recharcterizations are no longer allowed, which is in the proposed tax bills.

 

[RunningBum]

Huh? I don't think you can do conversions from 1/1 through 4/15 in the following year. Contributions, yes. Conversions, no. You need to do conversions by 12/31 of the tax year, which is still useful to tweak _AGI. Correct me if I'm wrong.

That's an idea for a proposal to allow people to fine tune their conversions after they've got all of their 1099s in early the following year, if you take away recharacterizations. It's not a recommendation of what to do now, since it's not currently allowed.

 

[43210]

You are right... we were discussing possible changes to allow those of us who like to dial Roth conversions to the top of a tax bracket to continue to do so once recharcterizations are no longer allowed, which is in the proposed tax bills.

I was 100% aware what the topic was, and was pointing out a misconception with the rules for when conversions can be made to count for a particular year.

 

[RunningBum]

I was 100% aware what the topic was, and was pointing out a misconception with the rules for when conversions can be made to count for a particular year.

The misconception was yours.

My idea would be to allow additional conversions from 1/1 through 4/15

is pretty clearly a proposal for a law change.

 

[Trooper]

Yes, the horse race aficionados ruined it for the rest of us...

I'm not completely familiar with horse racing (as it applies to Roth conversions, LOL). Is that what is meant by the below quote from the bill?

Subtitle F – Simplification and Reform of Savings, Pensions, Retirement

Sec. 1501. Repeal of special rule permitting recharacterization of Roth IRA
contributions as traditional IRA contributions.
Current law: Under current law, an individual may re-characterize a contribution to a
traditional IRA as a contribution to a Roth IRA (and vice versa). An individual may also recharacterize
a conversion of a traditional IRA to a Roth IRA. The deadline for recharacterization
generally is October 15 of the year following the conversion. When a recharacterization
occurs, the individual is treated for tax purposes as not having made the
conversion. The recharacterization must include any net earnings related to the conversion.
Provision: Under the provision, the rule allowing recharacterization of IRA contributions and
conversions would be repealed. The provision would be effective for tax years beginning after
2017.

Consideration: This provision would prevent a taxpayer from gaming the system by, for
example, contributing or converting to a Roth IRA, investing aggressively and benefiting from
any gains (which are never subject to tax), and then retroactively reversing the conversion if the
taxpayer suffers a loss so as to avoid taxes on some or all of the converted amount.

JCT estimate: According to JCT, the provision would increase revenues by $0.5 billion over
2018-2027.

 

[pb4uski]

Yup. That's it.

 

[RunningBum]

I'm not completely familiar with horse racing (as it applies to Roth conversions, LOL). Is that what is meant by the below quote from the bill?

That's one way to game it, another is to make two (or more) separate Roth conversions in different accounts, investing them in different ways. One could be in an aggressive stock fund, another in a simple bond fund.

If the market does well, keep the stock conversion, and recharacterize the bond conversion. If the market tanks, do the opposite.

It's not an enormous win, but if the market does well the gains that year are post tax since the conversion has already been taxed. If the market does tank, you've still lost that money, but you can keep it in your tIRA where it has yet to be taxed. It's not as if you can totally negate any losses.

 

[43210]

The misconception was yours.


is pretty clearly a proposal for a law change.

Okay. Write to Santa.

I'd rather the emphasis be on people understanding what the rules are.

 

[Trooper]

Yup. That's it.

That's one way to game it, another is to make two (or more) separate Roth conversions in different accounts, investing them in different ways. One could be in an aggressive stock fund, another in a simple bond fund.

If the market does well, keep the stock conversion, and recharacterize the bond conversion. If the market tanks, do the opposite.

It's not an enormous win, but if the market does well the gains that year are post tax since the conversion has already been taxed. If the market does tank, you've still lost that money, but you can keep it in your tIRA where it has yet to be taxed. It's not as if you can totally negate any losses.

Thanks guys. Given the uncertainty in where the bill will land, I will probably end up under-converting. The 30% marginal rate that would apply to an over-conversion is painful. Funny how I'm now adverse to a 30% rate in ER, while I paid more than that for a lot of my w*rking years!

 

[pb4uski]

On the last part, I was thinking the exact same thing earlier today.

Our tax bill for 2017 will be 1/20th of what it was when I was working.

 

[bizlady]

Does anyone know the date of record that will be used for year end distribution for Wellesley this year?

 

[pb4uski]

Why don't you just look it up?