Note about ROTH (and other) IRA's.
You are limited by how much you can contribute each year.
But you can convert all you want (or able to afford to pay the income taxes on) from a Traditional IRA or old, in-active 401K to a Roth IRA.
The catch is you have to add that amount to you taxable income for the year, which really hurts if you convert a lot, and/or are in a high tax bracket.
If you have a 401K from a previous job that is just sitting there and has not been transferred to an active 401K with your current job, you can convert or roll it over to a Roth IRA with the same tax liability conditions as above.
Converting cash from a Traditional IRA to a Roth IRA is easier and more predictable --- you can do it any time. Then you can buy SFOR when you feel it is a low price, even immediately after converting the money. Just be sure to take the tax liability of the converted money into account.
Converting SFOR shares from a Traditional IRA to a Roth IRA may take a couple days or so, and the pps could pop up before getting converted which means your tax bill could be much higher than expected.
You are not allowed to have matching sell and buy orders --- trying to move shares to a Roth IRA by selling from your Traditional IRA with a matching buy in your Roth IRA. That is considered possible market manipulation.
Money can not be distributed from a Traditional IRA or Roth IRA until age 59 and a half without penalty.
Money cannot be distributed from a Roth IRA until 5 years after your first Roth IRA was originally created.
If you do not have a Roth IRA yet, you can create one and convert the Traditional IRA or non-active 401K to it.
A Traditional IRA is a tax deferred IRA. You do not pay taxes on money contributed or on any profits --- until the money is withdrawn, at which time the distribution (withdrawal amount) is added to your other taxable income for the year, possibly putting you into a high tax bracket.
A Roth IRA is a tax free IRA --- after you pay taxes on the original contribution or conversion to it. If it grows to $10,000,000 it is still all tax free when you withdraw it. And no rules forcing you to withdraw any amount each year, like a Traditional IRA.
If you lose money in an any IRA, it is gone. No tax loss can be claimed or used against other investment profits.
A Traditional IRA has a RMD (Required Minimum Distribution) once you reach age 70 and a half. This could result in a high tax rate if you must distribute hundreds of thousands each year.
Long term / short term gains do not count or matter in an IRA. You may be better off converting (while pps is low) to Roth, or just investing non-IRA savings to get the lower long term capital gains 15% tax rate rather than ending up with a large Traditional IRA and large distributions at a higher tax rate.
There is no wash sale in an IRA. You can sell at a loss and buy back lower right away. You just have to be careful about 3 day settlement rules if you do not have other extra cash to trade with.
If you have little income other than social security, taking taxable distributions from a Traditional IRA can cause part of your social security to be taxed. You then pay taxes not only on your IRA distribution, but also on social security, in effect raising you tax liability from 10 or 12 percent to 20 percent or so.
For retired folks taking Original Medicare insurance Part B and Part D, a high income doubles or triples your monthly insurance premiums.
DISCLAIMER --- I AM NOT AN INVESTMENT OR TAX ADVISOR.
Verify anything you are thinking of doing with your certified investment and/or tax advisor, or read the IRS tax publications.
Best of luck.
You are limited by how much you can contribute each year.
But you can convert all you want (or able to afford to pay the income taxes on) from a Traditional IRA or old, in-active 401K to a Roth IRA.
The catch is you have to add that amount to you taxable income for the year, which really hurts if you convert a lot, and/or are in a high tax bracket.
If you have a 401K from a previous job that is just sitting there and has not been transferred to an active 401K with your current job, you can convert or roll it over to a Roth IRA with the same tax liability conditions as above.
Converting cash from a Traditional IRA to a Roth IRA is easier and more predictable --- you can do it any time. Then you can buy SFOR when you feel it is a low price, even immediately after converting the money. Just be sure to take the tax liability of the converted money into account.
Converting SFOR shares from a Traditional IRA to a Roth IRA may take a couple days or so, and the pps could pop up before getting converted which means your tax bill could be much higher than expected.
You are not allowed to have matching sell and buy orders --- trying to move shares to a Roth IRA by selling from your Traditional IRA with a matching buy in your Roth IRA. That is considered possible market manipulation.
Money can not be distributed from a Traditional IRA or Roth IRA until age 59 and a half without penalty.
Money cannot be distributed from a Roth IRA until 5 years after your first Roth IRA was originally created.
If you do not have a Roth IRA yet, you can create one and convert the Traditional IRA or non-active 401K to it.
A Traditional IRA is a tax deferred IRA. You do not pay taxes on money contributed or on any profits --- until the money is withdrawn, at which time the distribution (withdrawal amount) is added to your other taxable income for the year, possibly putting you into a high tax bracket.
A Roth IRA is a tax free IRA --- after you pay taxes on the original contribution or conversion to it. If it grows to $10,000,000 it is still all tax free when you withdraw it. And no rules forcing you to withdraw any amount each year, like a Traditional IRA.
If you lose money in an any IRA, it is gone. No tax loss can be claimed or used against other investment profits.
A Traditional IRA has a RMD (Required Minimum Distribution) once you reach age 70 and a half. This could result in a high tax rate if you must distribute hundreds of thousands each year.
Long term / short term gains do not count or matter in an IRA. You may be better off converting (while pps is low) to Roth, or just investing non-IRA savings to get the lower long term capital gains 15% tax rate rather than ending up with a large Traditional IRA and large distributions at a higher tax rate.
There is no wash sale in an IRA. You can sell at a loss and buy back lower right away. You just have to be careful about 3 day settlement rules if you do not have other extra cash to trade with.
If you have little income other than social security, taking taxable distributions from a Traditional IRA can cause part of your social security to be taxed. You then pay taxes not only on your IRA distribution, but also on social security, in effect raising you tax liability from 10 or 12 percent to 20 percent or so.
For retired folks taking Original Medicare insurance Part B and Part D, a high income doubles or triples your monthly insurance premiums.
DISCLAIMER --- I AM NOT AN INVESTMENT OR TAX ADVISOR.
Verify anything you are thinking of doing with your certified investment and/or tax advisor, or read the IRS tax publications.
Best of luck.
5
