Ask MetaFilter posts tagged with ira

What qualifies as a 'school cost' for early IRA withdrawal

christy — Thu, 14 Aug 2008 14:59:50 -0800

What counts as qualified schooling costs for early withdrawal from an IRA? I know, I know, I'm not supposed to touch my IRA money, but it would be super helpful to me to be able to take out just a little of it (like less than 10%) right now to until my school stipend kicks in. Would paying rent count as a legitimate school cost (assuming I was in school while paying said rent)? What other things count as qualified schooling costs and does the fact that my program gives me a stipend effect any of this?

Can I opt out of income taxes on inherited retirement benefits?

xanthippe — Tue, 22 Jul 2008 23:01:02 -0800

Can I opt out of paying income taxes on inherited retirement benefits in the USA? I won't be filing a tax return, anyway. I am a beneficiary of my deceased mother's state retirement plan. I have been given the option to either roll the amount over into an IRA (which I don't want) or take a direct payment, which appears to be subject to a 30% tax: 20% is automatic, and the other 10% appears to be related to electing not to put the money into an IRA.

If I choose a direct payment, the forms give me the following options:

A) "10% federal income tax withholding from any taxable portion of the accumulated account"; or

B) "no federal income tax withholding from any taxable portion of the accumulated acount"; option B continues, "If you request no withholding, you may still be responsible for payment of federal income tax on the taxable portion of your distribution. You may also be subject to tax penalties if your total estimated tax payments and withholding are not adequate to cover your tax liability."

Firstly, could someone please clarify the meaning of option B? I assume it means opting out of an automatic tax payment and agreeing to voluntarily pay it on my next federal income tax. However, I have been living outside of the USA and not filing tax returns for several years, and I intend to continue doing so. I am specifically confused about the ramifications of the last sentence considering, as far as the IRS is concerned, I will not have any income this year.

My real question is therefore: What, if any, consequences will I face if I simply take the maximum amount in cash and do not later declare it as income? If there is a penalty for this, is it subject to a statue of limitations? In other words, is this an easy way out or a really bad idea? I intend to remain invisible to the IRS for the forseeable future; will this ruin my plan?

Lastly, given that I am unlikely to ever live or retire in the USA, is there any other reason, specifically relating to taxes or avoiding such, that I should choose the IRA rollover option instead of a direct payment?

Thanks for any advise. I know I should see a financial advisor/accountant but I currently have major logistical obstacles in this regard.

VTIVX FOF FTW?

selfnoise — Mon, 30 Jun 2008 07:24:57 -0800

What, if anything, is a "Target Retirement" fund like VTIVX missing? I am about to roll my 401k from a previous employer into an IRA at Vanguard. (The previous employer's plan doesn't have great plan options and the webacccess/customer service is crap).

I'm currently 29 years old, so I was thinking of putting a large portion of this rollover into VTIVX, which is a bundle of different Vanguard Index funds. It seems like a cost effective way of buying into funds that I would probably just have purchased separately otherwise.

My question is, should I be looking to add anything else from Vanguard's offerings to diversify or enhance my overall selection? For example, this fund of funds does not include REITs... would it make sense to invest in something like VGSIX in addition to it? Or am I overthinking this?

I realize that there probably isn't a scientific answer to this question. Any thoughts are appreciated.

MAGI May (Be Headed North of $100k)

Anonymous — Thu, 26 Jun 2008 09:09:13 -0800

Will opening a Solo 401(k) before year's end reduce my modified adjusted gross income (MAGI)? I'm a 28-year-old freelance worker with a sole proprietorship, and I'd like to be able to fully fund my Roth IRA for 2008 It looks like I will soon reach $100k in earnings for the year, and I'm starting to think about ways to reduce my MAGI in order to be able to contribute the maximum amount allowed ($5000) to my Roth IRA.

From what I can tell, contributions made to an employer-sponsored 401(k) will reduce my MAGI, but does this reduction occur with self-employed (aka Solo) 401(k)s? If not, does anyone have any additional advice for reducing my MAGI?

advisor for beneficiary accounts

D-ten — Tue, 06 May 2008 09:58:01 -0800

I'd like to cash out some beneficiary investment accounts. I'd like to know in advance what the taxes and penalties (if any) would be. In other words, what would be the cash remaining from this. I've been asking my tax prep person for help and he's been referring me to a CPA and a pay for play investment counselor. Neither of those conversations gave me what I needed. I just need someone who can help me understand the net result of cashing in a beneficiary 401K and IRA. I have an account with Charles Schwab. Perhaps they would be the best people to ask? It would be nice to know all the aspects of doing this before making a decision.
Ultimately, having a financial advisor would be great. Where do I find this person who can start with the question above?

How do you choose between the various mutual funds?

downstairs — Fri, 25 Apr 2008 07:01:01 -0800

I have a new IRA. Limited experience with them. How do you choose between the various mutual funds? I have an IRA (max contributions) and then some extra in a new Schwab account. I now need to choose where to put the money. I’m somewhat new to all of it, and the number of options is overwhelming to research item by item.

I have an adviser (sorta) that recommended a fund that is set up for target retirement age (so he recommended I just dump it into the fund targeting retirement in 35 years).

How have some of you started out? Do you pick 2-3 and spread it based on risk level (some high, some moderate, some low)? Just pick one fund and stick with it? Spread across other variables?

Anything you avoid (load, no load, all that crap I don’t understand fully)?

where to invest?

locoindio — Fri, 18 Apr 2008 21:09:38 -0800

so ive got like $3500 or so that i want to put into either a roth ira and some index funds.....or that id like to put all together in the market. there are these funds ive been reading about a little in the market itself that are labeled as 'safe' bets. they pay anywhere from 10-15% return and are pretty much all in energy, oil, gas, drilling, and that sort of thing. it's buy and hold on a smaller scale. anyway, that's one option and the other option is to just put the minimum in a roth and buy about a grand's worth of fidelity funds. my goals are to be able to help pay rent and to build small amounts of wealth. alright, lemme know what you think.

Please help me decide between Fidelity and Vanguard.

salvia — Sun, 06 Apr 2008 16:37:09 -0800

Questions about opening a Roth IRA -- particularly, does it matter where I open it? If so, Fidelity vs. Vanguard? I want to open my first Roth IRA. I've read past questions and some online resources, but I still have some questions.

- First, does it even matter where I open it? If I figure out I screwed up, how hard is it to switch from one of these to the other?

- I will (very soon) have a 403b with Vanguard through my employer. Does that tilt things in favor of Vanguard for an IRA? Would I be able to "pool" these funds? It sounds nice to make one phone call rather than two. But is there some reason that tilts things in favor of Fidelity? Would it be better to have them both as options? Then I could hold, say, some of both group's target retirement funds.

- To make a good decision, do I need to figure out where I would invest the money first? They have different expense ratios even for their S&P 500 index funds (VFINX is .15% vs. FSMKX is .10%). I realize this isn't much of a difference, but if they differ on the simplest index fund, they're going to differ by more in other things, right? (I'd be deciding between S&P 500 index funds, some index fund with non-US companies, or a target-date retirement fund.)

- If you do think I should decide where to put the money first by actually looking at fees, how do I find that out? There are these scare stories (eg) about hidden fees. Are they still hidden if I look at Morningstar's front load %, back load %, and expense ratio? Or is there a better place to find all this out?

- All over the web people are saying that Fidelity's customer service is better and more informed. This has me leaning toward Fidelity. Do you think this still holds true?

- Lastly, what does this comment from jak68 mean, "Also -- in case you didnt know -- there is a small difference between buying funds via a trading account at a brokerage house (as with fidelity, schwab, ameritrade etc), VS. buying the fund directly from the fund family's website (vanguard, etc)?" Should this influence me in some way?

Thanks for your help. I'm interested in learning more over the long term, but I also have the feeling that I'm making this too complicated and should find a way to make this simple.

IncomeTaxFilter: Inherited IRAs, taxes, and my lazy, lazy habits.

liketitanic — Fri, 04 Apr 2008 10:06:08 -0800

I inherited a proportional share (a third or a half, usually) of several small IRA accounts last March. I have yet to actually claim these inheritances or do rollovers for them, so technically they're still under the name of the decedent. Do I have any tax obligations for these for 2007? Does the decedent (meaning do I have to do anything for the decedent's 2007 return)?

IRA For First Home Purchase

Smarson — Wed, 26 Mar 2008 11:42:18 -0800

I want to buy my first house AND not owe any Federal taxes for 2007...Traditional IRA Perhaps? So here is the deal, the Mrs and I want to buy our first house hopefully this summer, but Uncle Sam is trying to take a bite out of all the money we've saved up for a down payment (to the tune of almost $1000). I have this brilliant idea to lower our taxable income by each of us contributing the max to a Traditional IRA (like $4000, right?) knowing that we can withdraw it penalty free for a first time home purchase. I know we'll have to pay taxes on the $8000 in 2008, but since I'm going back to school starting in September, our tax bracket will be lower AND we'll own a home (hopefully), so it shouldn't hit us as hard. Other important info: this is in WA state. Combined 2007 income is less than $103,000.

Questions:
1. This plan sounds too good to be true...is it?
2. Assuming I move forward and each of us set up a Traditional IRA, is it possible to do so and not invest it anything knowing we plan on withdrawing the funds probably within the next 3 to 6 months?
3. I've got a mutual fund with TDAmeritrade already, should I stick with them to do the IRA or does it matter (worried about fees)?

Have Dime, Will Invest!

goalyeehah — Thu, 20 Mar 2008 20:21:57 -0800

Looking for Mutual Funds/Investments with low initial investment fees. I will soon be in a position to begin investing in mutual funds and IRA's. I feel like a little kid and would like to start next week. Some funds I have looked at are asking for an initial $3,000.00 investment. Are there mutual funds or IRA that ask for lower initial deposits, say in the $200 - $300 range......and are they solid companies?

Roth IRA contributions?

ruwan — Wed, 19 Mar 2008 07:27:02 -0800

Can I contribute to my Roth-IRA from my savings account if I don't earn an income? I am currently a grad student, living solely off student loans. I don't use all the money I get in loans, so I have it stored in a high-interest savings account until I need it. Can I use the extra money in my savings account to contribute to my Roth IRA (less than 2000/yr)?

Since I don't earn an income, am I eligible to contribute to the IRA? (I can't find anything online that states that I am not eligible. References would be great.)

Roth IRA income limit

Kimpossible — Wed, 12 Mar 2008 22:02:26 -0800

How does the IRS find out if you exceed the income limit and contribute to a Roth IRA?

How can I contribute to my IRAs as soon as possible?

Flunkie — Wed, 05 Mar 2008 18:19:10 -0800

How can I contribute to my IRAs as soon as possible? For tax year X, you are allowed to donate to IRAs at any point between January 1, X, and tax day, X+1. I would like to donate as soon as possible (January 1, X), and I generally have sufficient funds to do so. However, I do not do so - I am held back by my limited understanding of tax law.

I have three different IRA accounts: one that I've made Roth contributions to, one that I've made traditional deductible contributions to, and one that I've made traditional nondeductible contributions to.

My financial situation is, has been, and likely will be such that it is never entirely clear how much I will be allowed to contribute for each type of IRA, until my taxes are actually done. So, I never know how much to put into each account until I do my taxes.

This causes me to essentially lose a year (and more) of tax-friendly growth from every contribution, every year.

Is there a way that I can legally, easily, and safely get around this problem, and actually donate on January 1 of every year for that tax year?

For example, I think the best would be if I could just have a single IRA account that is allowed to hold all three types of contributions. If that's possible, then I could just dump the max in on January 1 of year X, and (just as I do today) figure out and report the exact breakdown when I do my taxes for year X in year X+1.

Or perhaps there's a way to move excessive contributions of an account of one type to an account of another type, without penalty? Again, then I could just dump in the max to one account on Jan. 1, year X, figure out the breakdown while doing taxes in year X+1, and then actually move funds between IRA accounts to make up for the difference.

In that case, though, what if I had, say, purchased stocks with the funds in the meantime? Do I move a number of shares that, in cost basis, corresponds to the amount I'm adjusting by? Or is it more complex?

Any information, suggestions, or advice on this would be appreciated. Thanks.

Tax Hell

mand0 — Thu, 21 Feb 2008 05:30:03 -0800

I forgot to claim a $4,000 contribution to a Roth IRA account during the 2006 tax season. How do I go about claiming this in the 2007 tax season? (more inside) Now as far as I understand, claiming a contribution to a Roth IRA on your taxes can only help you (i.e. give you a larger refund). So I shouldn't be in any trouble for forgetting. Is that correct? Can I claim the contribution I made in 2006 in 2007 or do I have to amend my 2006 tax return?

Just want to do my homework before I visit a tax professional, thanks :)

So happy about the 401K until...

kookywon — Fri, 15 Feb 2008 13:28:59 -0800

Did my 401K just blow my IRA deduction out of the water? This question is stumping my HR and my financial adviser. I was a consultant for 2007 until December. I was diligently squirreling away my monthy contribution of $333 so I would be able to deduct the max $4000 at the end of the year. However, I started a new job as a FTE and my paycheck for December enrolled me in the company 401K. When I fired up my TurboTax it said that I was unable to deduct the IRA because I was in a 401K for the year and my MAGI(?) had exceeded the allowance for that deduction. Do I have any recourse? Or do I just leave the money in the IRA as undeducted?

Is silver a good investment?

Anonymous — Fri, 21 Dec 2007 06:40:17 -0800

With the US economy apparently getting ready to go 'foom!', a friend of mine has become very excited about silver as an investment. So apparently the great thing with silver is, it's seriously undervalued at the moment, due to ages of behind-the-scenes manipulation to keep the price artifically low, which is now getting ready to 'splode and send the price from $14/oz to $100/oz or more, and furthermore even if it doesn't, it's certainly not going to get any cheaper, so the worst possible scenario is breaking even. Plus the fact that it's hard value and not "fiat currency", and it's necessary to get the hell away from US dollars and the stock market, because everything's going to burst into flames any day now, he says. He's in the process of converting his savings into a safe-deposit box full of silver. Though I sound flippant, he's actually very convincing... but he's self-educated in these issues, so I'm hoping AskMeta has some more experienced economists.

At the moment, I have no retirement fund, but I do have about $23 grand in a mutual fund. I'd been thinking about cashing out some of it to start an IRA anyway, but given the current economic situation, what should I do? Should I get my money out of the fund and away from the stock market? And do what with it? IRA? Is an IRA safe if the US goes mega-inflation? Is that likely to happen? Should I buy a pantload of silver bullion and bury it in the yard? I don't know anything about any of this grown-up crap. Help!

(posting anonymous for reasons of not discussing my finances with strangers)

Can I withdraw money for a first-time home purchase with my accounts?

InvestorMD — Thu, 20 Dec 2007 20:43:24 -0800

You can use your Roth IRA for your first time home purchase (up to 10k). However, you must have the account open for 5 years. How is account defined? I have a Fidelity Roth IRA account open for 6 years now. I have a T.Rowe Price Roth IRA open for 2 years. My wife had a John Hancock Roth 401(K) (open 2 years ago) which we rolled over to a T.Rowe Price Roth IRA when she switched jobs back in August.

The rules stipulate that the account must be open for 5 years? Does this included the general umbrella of the Roth IRA or each single account under the umbrella? We plan on buying a home after I am done with medical school. We were thinking to put some more cash into our Roth's for the time being and wanted the flexibility of withdrawing our CONTRIBUTIONS for a down-payment if needed.

On a side note, can this money be put back or will that count as new contributions? I expect my income level will make me ineligible for contributing to a ROTH after I'm done with the 3+ years of medical school and 4-5 years of residency. Hence, why we are trying to contribute as much to get ahead start.

Using 401K & Roth IRA to purchase second property

endlessknot — Sun, 18 Nov 2007 12:22:18 -0800

Using 401K & Roth IRA to purchase second property ?? Is this possible ?? Any suggestions. Thanks, ek

What should I do with my Simple IRA?

junkbox — Tue, 13 Nov 2007 12:17:59 -0800

I have a Simple IRA from a previous employer. Should I roll it into my 401(k), convert it to a Roth IRA, or do something else entirely? I contributed to a New York Life Simple IRA through my previous employer (small % of employer matching, 100% vested) from 2004-2005. I never bothered to roll it over because it's such a small amount of money (Google research supports the idea that come 2008, I can roll my Simple IRA into a Roth IRA in one step. (I meet the qualifications for a Roth IRA; married, filing jointly, income below $100,000.)

* Am I going to incur a bunch of fees or other nonsense that would make this a silly idea? Should I roll it over into my 401(k) instead?

* Is there a smarter, more flexible or financially savvy thing I should do with my Simple IRA that I haven't thought of yet?

* Finally, if I go with a Roth, where's the best place to open it?

The new job I'm at offers a crappy 401K program--no matching at all!! Should I enroll in it or just keep my money and put it into an IRA when I have the minimum?

misanthropicsarah — Tue, 06 Nov 2007 10:44:06 -0800

The new job I'm at offers a crappy 401K program--no matching at all!! Should I enroll in it or just keep my money and put it into an IRA when I have the minimum? Past jobs always offered some kind of match, and I took full advantage of that. But since this job isn't matching, I'm not sure what the benefit to me is, other than that the money I put into my 401k will be pre-tax.

I'm only able to put about 3% of my salary away right now, so I was thinking I might be better off stashing that into an ING account every month, and when I have enough putting that into an IRA or something.

Is that stupid? Should I just go with the 401k? Something else I should do?

I'm 27, the plan is thru Morgan Stanley, I have 0 savings except what I have in old 403b accounts.

Should I put my Eggs in a Risky Basket?

ikahime — Tue, 17 Jul 2007 20:34:07 -0800

IRAfilter: Am about to get a traditional IRA to roll some retirement funds into from an expired employer plan. Got stuck when I was asked which mutual funds to select. I've probably got around $4K coming from an old emloyer in another state. I must roll it into a traditional IRA or take heavy tax penalties. I've decided on Vanguard, but know nothing about which mutual funds I should select. I guess I'm young enough to afford to be a little risky, but I'm taking any and all advice. Mid-caps? International Value Index? I'm so overwhelmed with choices, and I don't have a lot of time to whittle through them all.

Selling shares within a Roth IRA

electric_counterpoint — Fri, 13 Jul 2007 10:16:10 -0800

What are the rules about selling shares held in a Roth IRA? Warning: still a bit of a finance n00b... Maybe I am just Not Clear on The Concept, but it seems to me that, when the market's had a good few years and the stocks and funds I hold are up, I should sell them and lock in the gains. Since they're good companies (or good funds, as the case may be), I'd probably repurchase them with the proceeds. At least, this is what I would do if I owned these shares in a traditional brokerage account, but I own them within a Roth IRA. However, I can't find anything online about anyone doing having done this, let alone any advice about it!

I know that I can't sell my shares and divest from the IRA completely without paying an early withdrawal penalty. I also know about capital gains taxes and the wash sale rule and all that, and I know that those apply to taxable accounts. Are the same rules in place for Roth IRAs? Am I just missing the point of an IRA, or what?

PATRIOT Act + Roth IRA?

comwiz — Thu, 07 Jun 2007 16:09:38 -0800

What provisions of the PATRIOT Act govern the opening of my Roth IRA? I recently opened a Roth IRA through T. Rowe Price. In order to meet certain "PATRIOT Act" requirements, I am being required to mail in a W-9 form and photocopies of my Social Security card and drivers license to T. Rowe Price.

What part(s) of the PATRIOT Act require my IRA custodian to have these on file?

HSA's = tax-free retirement account?

MrBCID — Wed, 16 May 2007 17:21:06 -0800

Health Savings Accounts (HSA's) ... Can they be used as just another tax-free retirement account after you max out your Roth IRA? I usually max out my Roth IRA and contribute to a 401(k) ... I just came across this Newsweek article that got me thinking about opening an HSA.
I used to contribute to a Flexible Spending Account and understand that the money in an FSA is lost if not used within a year...
An HSA on the other hand would let me keep that money in there kind of like a Roth IRA correct?
Do I have to be enrolled in a High Deductible Health Insurance policy to be eligible?

I am 22 years old and don't need my medical insurance for anything more than a yearly check-up.

Any advice would be really helpful. Thanks in advance.