<p>So dstark, I guess you follow my dad’s (atheist) advice.</p>
<p>You don’t do what is right because God is watching, your boss is watching, or other people know.</p>
<p>You do what is right because YOU will know.</p>
<p>Then again, I don’t know if many of us would have done what you did, at such a penalty.</p>
<p>Today, DH and I are visiting our local SS office.
Appt to learn whether he should collect SS at age 62 this year or wait.
Our decision is complicated by our disabled 25 yr old DD who lives with us.
Need to learn how claiming affects her, need to maintain her Medicaid at all costs since her services are pegged to it. She will transition from SSI to SSDI, if I have it right…</p>
<p>Dstark, THANK YOU for starting the other thread. Something that was on my to do list that hadn’t made it to the top. I look forward to continuing our discussions about our daughters over there!</p>
<p>@musicmom, SSA personnel for the most part know the rules about SS, although they sometimes have holes in their knowledge. Regardless, their expertise is not in optimizing claiming strategies. I strongly encourage you, before you sign up for anything, to use some of the free software on the web, or even pay a modest amount for something like maximizeyoursocialsecurity.com. In the latter case, when I had a question about the recommendation, Dr. Kotlikoff answered my question himself. </p>
<p>Please look at <a href=“http://www.pbs.org/newshour/making-sense/will-social-security-tell-im-leaving-benefits-table/”>http://www.pbs.org/newshour/making-sense/will-social-security-tell-im-leaving-benefits-table/</a></p>
<p>ETA: Kotlikoff’s software is also available online in a free version, which might be sufficient. </p>
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<p>@dstark Why? What is magic about $3 million? What if someone is planning a very lavish retirement? How is it “tax avoidance”? I have had multiple huge winner stocks in my IRA. Are you saying there should be a cap on how successful my investments are in my account? </p>
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Have as lavish a retirement as you want, however I don’t think it is reasonable for other taxpayers to completely subsidize it.</p>
<p>It’s “tax avoidance” in the sense that if you are wealthy enough to fund IRAs at this level you probably have other goals than just paying for retirement. It becomes as estate-planning tool, and that’s not what the intent was.</p>
<p>It’s an issue I suspect affects very few people.</p>
<p>BTW, tax avoidance is the use of legal methods to lower the amount of tax owed by the use of permissible deductions and credits.</p>
<p>Examples of tax avoidance would be contributing to a 401k or IRA, investing in municipal bonds, investing in annuities, and gifting annually to avoid estate taxes.</p>
<p>One doesn’t have to be wealthy to fund an IRA like this–a successful investor gets to the same endpoint. Should that person be penalized? How are other taxpayers subsidizing this? </p>
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<p>By taking up tax burden while you take tax-free distribution? Did I need o say that? With $3M in roth, one can safely withdraw 4% annually, $120K tax free. That income probably belongs to top 20%. We can’t subsidize top 20%. You may not feel rich but many others poorer.</p>
<p>I don’t have a Roth. Taxes will be paid upon distribution. You aren’t subsidizing anything. Let’s take the example of a Roth though. I have a client who converted his IRA to a Roth last year. He paid $420,000 in taxes to do it. He bought a stock in his Roth that went up 500%. Do you feel this is wrong? Are you subsidizing him in some way? Should he be required to pay taxes again? How many times do you want to tax him?</p>
<p>“Do you feel this is wrong?” no.
“Are you subsidizing him in some way?” yes
" Should he be required to pay taxes again?“He should not be required to pay income tax or cap gains taxes on that gain.”</p>
<p>“How many times do you want to tax him?” there should be no income or cap gain tax on that gain…depending on the size of his estate…there may be an inheritance or wealth tax…</p>
<p>I dont think we should tax him on the 500 percent gain…</p>
<p>We should limit roths…</p>
<p>There should be mandatory withdrawals with roths as there are with iras…</p>
<p><a href=“IRA Required Minimum Distributions Table 2023 | Bankrate”>http://www.bankrate.com/finance/money-guides/ira-minimum-distributions-table.aspx</a></p>
<p>Busdriver11, I am with your dad. I want to sleep at night. :)</p>
<p>musicmom, thanks. We will see how the thread goes…</p>
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<p>I pay income tax on my earnings. I invest it and have 500% gain. When I sell it, I pay tax on the gains although the investment is with the money already taxed. Afterwards, I invest what’s left after paying the taxes in bonds and the interest income is taxed again. It looks like I am paying taxes again and again.</p>
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<p>Why not? When I converted nondeductible IRAs to roth, I didn’t have to pay taxes on the original amount but any gains on it were taxed. Why should Roth gains be treated differently? It was to help lower tax bracket earners to save for retirement. With backdoor conversion, it is helping people who don’t need help. The original intent was lost at taxpayers’ expense.</p>
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That means he rolled over at least $1 million into the Roth, and had $420K laying around to pay the taxes. It’s probably pretty safe to assume he is in the top 1%, or close to it.</p>
<p>Did he invest the whole million in that one stock? If so, he now has $6 million in the Roth. Is he planning on spending it all in retirement, or pass a big chunk of it down to his kids?</p>
<p>Is it really unreasonable to say “if you have over $3 million in your IRA, you can’t make any more contributions?” </p>
<p>$6 million is not a lot of money, only to the CC crowd. I once was looking to open an account at Barclays in LA for currency transfer, it requires $25 million to do business.</p>
<p>As reasonable as one may try, sometimes you just have to tax to come up with revenues needed. Ww include tax exempt muni bonds in the income to calculate SS benefits tax because we need to although we call it tax exempt and pay a minuscule interest. What’s so sacred about roth that it has to be taxed only once? All other types are taxed multiple times whenever a transaction takes place.</p>
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<p>Ahhhh…so you think that, even though a law was passed that allowed Roth conversions, a new law should be passed to retroactively tax the gains in the converted Roth if they get too big . BRILLIANT! You seem to forget the $420K in taxes paid, which would not have been paid for 20 or 30 years, if ever, if the account had remained an IRA. In essence, he is subsidizing you then, is he not? </p>
<p>Uhhh… Parent1337… </p>
<p>Nobody said what you wrote. Have fun!</p>
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<p>He is not a 1%'er at all. All of this money stems from a single investment of $20,000 many years ago. His salary puts him squarely in middle class territory. The $420K came from investing in the same stock that is in his Roth. </p>
<p>What does it matter what he plans to do with his IRA? He’ll spend what he needs and the rest goes to his heirs tax free. That is how the law was set up. They too will enjoy tax free withdrawls because their father had the forethought to invest wisely in a Roth IRA. This is all legal, by the book. Nobody can say, “That IRA is big enough, you don’t need anymore.” That’s just ridiculous.</p>
<p>How are regular iras not taxed?</p>
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<p>Post 2031 by Iglooo "Should he be required to pay taxes again?</p>
<p>Why not? When I converted nondeductible IRAs to roth, I didn’t have to pay taxes on the original amount but any gains on it were taxed. Why should Roth gains be treated differently?"</p>
<p>I interpret that to mean Iglooo believes his Roth gains should be taxed again(which negates any reason to have a Roth in the first place, obviously!)</p>
<p>Have fun!</p>