Roth IRA

I had a 403( b) (if I'm right and that's the 401(k) for non-profits?) with Great American, opened back in the early 80's. Turns out it was in an annuity, and a bunch of wise shareholders got together and instigated a class action suit. There is simply no excuse for putting a tax-advantaged vehicle (not to mention, a HIGH PRICED tax-advantaged vehicle) inside of a tax shelter. It's unconscoinable. Great American lost the suit, and had to give us all some extra money in our choice of incomprehensible choices.

I tried to get out of this stupid company altogether, but the "surrender fees" are absolutely prohibitive.

TIAA/CREF are non-crooks, as far as I've been able to figure out, and very helpful, and often will bend over backwards to help you understand your choices.

Good luck! You're doing the right thing, it's just confusing to get started! A little reading (either the book mentioned above, or Jane Bryant Quinn) goes a LONG way.

Anne
 
My understanding is that is that "tax-exempt interest" (line 8b of 1040), and "taxable IRA distributions" (line 15b) are included in the computation of how much SS is taxable. However, I don't see any reference on the IRS worksheet to the tax-exempt IRA distribution, which is a component of line 15a.
John Lee
 
The Roth IRA is one of the best gifts that congress ever gave us.  

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Is there a Roth IRA like option for people whose AGI exceeds the limit and therefore are not eligible for it?

The only tax deductions that would reduce our AGI that I have been able to come up with in the past are:

1. Real estate Tax
2. State Tax
3. Mortgage Interest
4. Charitable Contributions

And this set of deductions has left me high and dry when it comes to qualifying for a Roth IRA.

All suggestions are welcome ...... even those that might say: Earn less money, you will have less AGI and can then qualify for Roth IRA.

Regards,

Dante
 
Hello Dante! Can't help on the Roth. Others will.

My income is so low now that I effectively pay no taxes.
Nice. Before that I spent years caught in a kind of income tax inferno. Hope you can avoid this fate, although with your moniker................ :)

John Galt
 
Dante, try a conventional IRA and then convert.

Without knowing all the ins & outs of 401(k)s, 403(b)s, 457s, SIMPLEs, or Keoghs, one approach would be to put today's after-tax money in a conventional IRA.

When you ER (ideally well before age 70!) then your income will drop below the conversion limit of $100K. (If it doesn't then you won't care about the conversion anyway, right?) Then you'd be able to convert the conventional IRA to a Roth.

Spouse and I are converting during the "lean years" between my ER and her pension. Converting & paying taxes now can be done below the 25% bracket, which we'd end up in when spouse's pension kicks in. (Assuming that RMD taxes will still be that low in 25 years!)
 
It seems to me that a Roth IRA, or for that matter any after tax assetts, have an advantage that should be carefully managed when one is also receiving SS.
Within certain income limits, the percentage of SS that is tax free is increases as the ratio of SS to other pre-tax income increases. That is to say, a smaller percentage of our SS is taxable as we minimize the amount of pre tax income that we take.
Therefore, not only do we recieve our Roth IRA income free of tax, but we would also pay less tax on our SS.
This may also be another argument for delaying SS payments until 65+, since this would also increase the above ratio, resulting in us paying less tax on a larger SS benefit.
John Lee
 
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