Don Garments

I just converted my 401k to a traditional IRA and I'm not near retirement. The IRA gives you literally the entire market to invest in while your sponsored 401k is limited to the plan mutual funds, normally only a couple of dozen. Talk to the plan administrator. A lot of the pilots at my company are doing this.

Denny Crane

Now there’s a post I made awhile ago!

While I’m still working I’m happy with the brokerage link option in the 401k. That post was pointed specifically at converting traditional retirement savings to Roth after retirement for longterm retirement moneys.

Just another thought too, with the passage of the new law that requires heirs to withdraw an inherited IRA/401k etc within 10 years.........does that make a Roth account even more attractive?

Denny

Don Garments

It makes the Roth more attractive to your heirs. I would have to assume a massive tax burden to convert right now so I think my kid is just going to have to suck it up and spend my money.

Buck Rogers

thought the "new" tax rule also now requires a RMD of ten years for heirs even on Roth accts?

I should have said...if you leave the money to say a child or grandchild.....

"The Secure Act’s anti-taxpayer RMD change also will not affect accounts inherited by a so-called eligible designated beneficiary. An eligible designated beneficiary is: (1) the surviving spouse of the deceased account owner, (2) a minor child of the deceased account owner, (3) a beneficiary who is no more than 10 years younger than the deceased account owner, or (4) a chronically-ill individual (as defined).

If your grandfather dies in 2020 or later, you can only keep the big Roth IRA that you inherit from him open for 10 years after his departure.


Under the exception for eligible designated beneficiaries, RMDs from the inherited account can generally be taken over the life or life expectancy of the eligible designated beneficiary, beginning with the year following the year of the account owner’s death. Same as before the Secure Act."

Denny Crane

As would I. That is why I’m looking to do it in the first couple years in retirement

None of my kids qualify for that exemption so they will have to receive any thing I have leftover in traditional IRA/401k accounts within a 10 year period........and be taxed on them.

Here’s a question I’m not sure of the answer. With the Secure Act now law, are heirs to Roth type accounts subject to federal taxes when they are inherited....like a traditional type account? I think not.

Denny

Buck Rogers

Denny,

I could be wrong, but....I think you CAN still leave your ROTH to your kids or grandchildren....but the Secure Act now mandates that they Must withdraw ALL the funds within 10 years....therin lies the change that, to me, is perplexing

Denny Crane

I get that.....but is an inherited Roth type account subject to any taxes in that 10 year period like a an inherited traditional type account? I don’t think it is but am not sure. I think the gubmint wants the money out of any type of inherited retirement account so it can get the taxes on a traditional withdrawal or taxes earned on investments made after withdrawal from a Roth type acct.

Denny

TED74

I'm going to start using this instead of Dilly Dilly!

Gunfighter

One reason is/was estate planning, but the SECURE Act has reduced the value of an inherited Roth IRA by enacting a 10 year RMD on them now.

So the old captain with a young wife who just started a family is an estate planning genius. You may be onto something BR...

You are correct. The IRS just wants the money out of a tax free account. They want to start collecting capital gains taxes. The states support it, because it will probably get spent, generating sales tax revenue.

DWC CAP10 USAF

Barring the "don't take financial advice from pilots"....I'm trying to figure out the "when" with regards to when do folks change their investment strategy from regular contributions, to back door conversions, to mega back door?

Do most folk just do regular 401k and IRA contributions until they hit the income cap where they can no longer contribute to Roth IRA's, then they start doing the back door converison?

Then once they starting hiting the 415c limits and start getting DPSP cash, start doing the Mega back door?