Roth IRA Conversion Strategy: Convert When Your Income is Down

With a Roth IRA, people get tax deferred savings.  That means the people with Roth IRAs will pay taxes on their contributions when they make them.  Then they will never again have to pay taxes on any qualified withdrawals.  By contrast, a traditional IRA gives tax deductible savings.  When making withdrawals from a traditional IRA, the savers will not only have to pay taxes on the contribution Read more ...

13 Vehicles for Saving for Retirement

Everyone who plans on living into their Golden Years should be saving for retirement – and there are plenty of options when it comes to saving:   Cash: You can always stash your retirement savings away in a box under your bed.  Of course, you won’t be earning any interest on this and inflation will take a toll (that is if thieves, fire or flood don’t make away with your savings first!).   Checking Read more ...

All about Form 5498 for Roth IRA Savings

The IRS wants to know exactly where every cent of your money is at all times – including the money you have stashed away for retirement.  For Roth IRA savings, the IRS uses with Form 5498 to keep track of your assets. All IRA custodians are required to generate Form 5498 for their clients. The Form will report all of the contributions for the tax year, as well as rollovers and recharacterizations.   Read more ...

How to File Taxes on Roth IRA Early Withdrawals

The benefit of having a Roth IRA is that withdrawals are completely tax free, so long as the Roth IRA owner is 59 ½ years old and the Roth is older than 5 tax years.  If these conditions are not met and no exception applies, then withdrawals will be subject to taxes plus a 10% early withdrawal penalty. Taking early withdrawals would destroy the benefits of having a Roth IRA, so owners should avoid Read more ...

Practical Retirement Advice from 6 Experts

Sitting down for retirement advice from an expert comes at a premium cost.  But, if you want to make sound retirement choices, you will need the advice.  At least you can get these pieces of retirement wisdom from renown experts for free: Henry K. Hebeler on Choosing a Retirement Planner: First use a Certified Financial Planner (CFP).  I believe the very best CFPs come form the National Association Read more ...

4 Pervasive Myths about Roth IRAs

Roth IRAs are a relatively new savings vehicle, so it is no surprise that many people are still confused about the rules.  But there are some beliefs about Roth IRAs which go beyond confusion to downright misinformation. Here are the top 4 pervasive myths about Roth IRAs:   1. You have to wait 5 years before you can withdraw any money Roth IRAs have what is known as the “5 year rule” Read more ...

Using a Roth IRA to Save for College

Even though a Roth IRA is meant to be a retirement savings fund, it can also be used to save for your kids’ college.  The major benefit of using a Roth instead of traditional college-savings accounts is that contributions can always be withdrawn from the account without incurring any taxes or penalties.  This means that you won’t get penalized if your kids decide not to go to college. If you Read more ...

The 5-Year Rule and Roth IRA Conversions

One of the most common misconceptions about Roth IRA conversions has to do with the 5-year rule.  People wrongly assume that they won’t be able to touch their Roth IRA assets until 5 years after the conversion.  Here is why that idea isn’t completely true:   Qualified Distributions of a Roth IRA Let’s start by reviewing the rules of a standard Roth IRA contribution (as opposed to Read more ...

Converted to a Roth IRA in 2010? You May Need to Report it for 2012

One of the downsides of converting a traditional IRA to a Roth IRA is that you need to pay taxes on the entire amount.  To make matters worse, the conversion amount gets tallied into your yearly income and can push you into a higher tax bracket for the year.  This can make the conversion a financial nightmare for many savers (more on Roth IRA conversion problems here).   In order to raise Read more ...

Tips to Reduce Investment Costs

Do you know how much you paid in investment fees this year?  Chances are that you don’t. Unlike our monthly utilities and debts which get billed every month, investment fees get taken directly out of our portfolios.  Without the bill to show us how much we are paying, it is easy to overlook these fees.  Also, since the fees seem low, we might not even worry about them.  1% of a $5000 investment Read more ...