Roth 5 year holding period

[kgtest]

I attempted to put the fairmark information into a more readable form. How did I do?

Did great, clearly the best tax advantage is to wait until 59.5 to withdraw anything, having established the Roth 5 years prior.

However, since there is the strech-IRA, I personally would touch Roth IRA last if I plan to leave money to heirs, unless you have a lot in Roth and withdrawing just a little might prevent the loss of an ACA subsidy.

Rule 1: never take money from roth
Rule 2: especially before 59.5
Rule 3: and only after 5years of initial Roth funding
Rule 4: unless you have large roth and need aca subsidy advantage, or don't have heirs

 

[kaneohe]

I attempted to put the fairmark information into a more readable form. How did I do?

I didn't doublecheck the details but I love it......particular the color coding which shows the same results in the same color. Nice! The color scheme might make it easier to remember the details (if you can remember the color scheme)

 

[RunningBum]

Did great, clearly the best tax advantage is to wait until 59.5 to withdraw anything, having established the Roth 5 years prior.

However, since there is the strech-IRA, I personally would touch Roth IRA last if I plan to leave money to heirs, unless you have a lot in Roth and withdrawing just a little might prevent the loss of an ACA subsidy.

Rule 1: never take money from roth
Rule 2: especially before 59.5
Rule 3: and only after 5years of initial Roth funding
Rule 4: unless you have large roth and need aca subsidy advantage, or don't have heirs

What about taking from a Roth vs. selling equities with a large gain? If left untouched, those equities would get a step up in basis for your heirs. Not sure how to do the math on that. The stretch Roth would keep the funds in a tax advantaged account for the heir (slowly dwindling down with MRDs starting right away, I believe), but if you sell the equities to save the Roth you have to pay tax on the sale, and therefore have to sell more--leaving less for the heirs.

 

[Ragna]

Kind of a goofy website name, but I found the analyses of the tax implications interesting and understandable in the example.

Reader Financial Review: Scared to Death of Early Retirement - Go Curry Cracker!

 

[jkern]

Have you calculated how much you will save? The problem is that when you convert, you will be paying taxes early which reduces your future earnings. It is true that earnings in the Roth aren't taxed (subject to conditions) but the reduced earnings from paying the tax early may compensate w/ the net result being a wash.

Yes, it saves me $2500 in taxes. I'm paying the taxes from a cash account that will only earn 1% per year over the next two years.

 

[pb4uski]

I attempted to put the fairmark information into a more readable form. How did I do?

You did great.... mods, can we get that chart Sticky-ed?

 

[Sunset]

what do you think? from the table:
OVER AGE 59.5
LESS THAN FIVE YEARS SINCE OPENING FIRST ROTH IRA

So I guess you have to keep a piece of paperwork from the first opened and closed ROTH to proof you had one.

Until the current ROTH is 5 yrs old, then just keep paper from it.

Rinse and Repeat....

 

[kaneohe]

So I guess you have to keep a piece of paperwork from the first opened and closed ROTH to proof you had one.

Until the current ROTH is 5 yrs old, then just keep paper from it.

Rinse and Repeat....

Yup, you got it. This is the easy part if you are over 59.5, you only have to worry about the oldest 5 yr Roth. For the young whippersnappers, you have to worry about the contribution, conversions....dates and amounts, whether any amounts were recharacterized, and whether any prior withdrawals were made. You can be very surprised if you didn't keep such info,