walkinwood
Thinks s/he gets paid by the post
Fellow Early Retirees,
Do you treat the taxes on IRA to ROTH transfers as part of the year's expense? Or do you treat that as an "investment expense" and take it out of your portfolio total?
In case I'm not clear, here's an example.
Say your annual withdrawal (based on your SWR) is $40,000 based on a portfolio of $1,000,000. You moved $X from a rollover-IRA to a ROTH and the tax on that move is $1000. To make things easy, your portfolio return is 0% for the year.
Do you consider that $1000 an expense against your $40,000 annual withdrawal?
Or,
Do you deduct it from your year-end portfolio value. ie. $1,000,000 - $40,000 - $1000(Tax)? = $959,000
Here's my thinking:
Since the ROTH transfers are done with the hope of a better return from your IRAs, it should count as an 'investment expense' and just be accounted for in your year-end portfolio value.
PLEASE do not turn this thread into a discussion on the benefits (of lack thereof) of IRA to ROTH transfers.
Do you treat the taxes on IRA to ROTH transfers as part of the year's expense? Or do you treat that as an "investment expense" and take it out of your portfolio total?
In case I'm not clear, here's an example.
Say your annual withdrawal (based on your SWR) is $40,000 based on a portfolio of $1,000,000. You moved $X from a rollover-IRA to a ROTH and the tax on that move is $1000. To make things easy, your portfolio return is 0% for the year.
Do you consider that $1000 an expense against your $40,000 annual withdrawal?
Or,
Do you deduct it from your year-end portfolio value. ie. $1,000,000 - $40,000 - $1000(Tax)? = $959,000
Here's my thinking:
Since the ROTH transfers are done with the hope of a better return from your IRAs, it should count as an 'investment expense' and just be accounted for in your year-end portfolio value.
PLEASE do not turn this thread into a discussion on the benefits (of lack thereof) of IRA to ROTH transfers.