Professional Courtesy Among Ledgies
 

I notice that virtually every ledgie has an interesting skill or knowledge base of something. So I thought it would be nice if we could all help one another answer one another's questions about whatever. There is a lot of ledgie talent on the forum: teachers, accountants, healthcare practitioners, musicians, editors, bankers, loan officers, plumbers, students, retailers, writers, scientists, veterinarians, &c.

I'd like to know, in plain simple English, what the benefits are of a Roth IRA compared with my 401(k). I'm maxing on my 401(k) but Suze Orman says to consider Roth IRAs, & I didn't catch her reasons. Any of our money-minded or retirement-minded ledgies able to help me?

If anyone has an editorial question, I'll try to help -- that's how I make my living.

David, I did a search and came up with this:
What is a Roth IRA?
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Depending on your personal tax situation, a Roth IRA can be an excellent alternative to a Traditional IRA. Not everyone, however, is eligible to contribute to a Roth IRA. To be eligible to contribute:


You must have compensation income for the year; and
Your "modified adjusted gross income" must not exceed certain limits
Although contributions to a Roth IRA are not deductible, Roth IRAs can distribute their earnings free of federal income or penalty taxes if certain requirements are met. (Withdrawals of contributions made to a Roth IRA are not subject to federal income or penalty taxes.) For earnings to be withdrawn tax-free, they cannot be distributed until five tax years have passed since the first day of the tax year in which you made your initial Roth IRA contribution (including a conversion contribution from a Traditional IRA). For 2005, eligible individuals can generally contribute up to $4,000, or 100% of compensation, whichever is less. An individual's eligibility to make Roth IRA contributions phases out at certain levels of "modified adjusted gross income". Please see table below for more details).

If you would like to learn more about which type of IRA might be most appropriate for you, our comparison table provides some basic background information. If you are interested in converting your Traditional IRA to a Roth IRA, you may want to use this checklist to see if a conversion may be right for you.1 If you would like to find out more about rollovers or how to rollover an IRA to E*TRADE Securities, please visit our Rollover Center. Before converting a Traditional IRA to a Roth IRA, we recommend that you consult a tax professional.


How much are you Eligible to Contribute to a Roth IRA for your 2005 tax year?

Federal Income Tax Filing Status Modified Adjusted Gross Income ("MAGI") Maximum Amount You Can Contribute for 2005 (not including catch-up contributions)
Single Up to $95,000 $4,000
$95,001-$109,999 Less than $4,000
$110,000 or more Not eligible
Married, filing jointly (MAGI numbers reflect both spouses' combined incomes) Up to $150,000 $8,000 ($4,000 per IRA)
$150,001-$159,999 Less than $8,000 ($4,000 per IRA)
$160,000 or more Not eligible
Married, filing separately Up to $9,999 Less than $4,000
$10,000 or more Not eligible
1. Please note that our Roth to Traditional checklist is intended to serve as an educational tool, not investment or tax advice. Your circumstances are unique. Therefore you should consult a tax professional if you feel you need more personal advice.

here's another link
http://www.gofso.com/Premium/TS/fg/fg-Roth_IRA.html

I love Suze! I'm no expert, but I know she prefers Roth IRA's to conventional IRA's because although you pay taxes on it now, you do NOT pay taxes on your withdrawl from the Roth after retirement age.

A regular IRA is pretax, which is great right now BUT you will pay taxes when you withdraw - at the tax bracket you are in at THAT time, not at the time you contributed.

As far as the Roth vs. 401K, after you have reached your max (the company has maxxed their contribution), she sees no point in putting more $$$ in if they are no longer matching you.


I think. Someone correct me if I'm an idiot.

You're right on the money there. She said this at her book talk in Boston earlier this year. Due to the performance of the stock market she changed her advice about maxing out your 401k contributions to only putting in what your employer matches.

I recently found out my employer matches nothing, but perhaps will match at its discretion after the end of the year. They used to have a really decent match but I didn't get into it before and it looks like I won't be getting into it now either.

I work for the state, so they don't match anything obviously. I do have a mandatory retirement contribution, but damned if I know where it's going. :( I know that I really have to get more organized as far as all this goes, but I haven't been able to yet.

That's excellent information!!! thank you for sharing it.:nod:

Ok, 401k's fine...but what about 403b's for state employees? What are the maximum contributions for those?

As in, you're a journalist? An editorialist? (I'm not being snarky - just seeking clarity). :)

Copy editor, formerly for newspapers & currently for tech publishing houses.

I can also help you with your nutritional needs & W.C. fields lore!

I want to thank all the folks who provided info on 401(k) vs. Roth IRA above. It's time to do a little rearranging.

Your work is very similar to mine except I read for the technical errors and not so much grammatical, although if the copy editor missed them on the first pass I correct those as well.

As a hobby I take pictures and also fix them up in Photoshop. Below is a photo I just restored.

http://i8.photobucket.com/albums/a29...eforeAfter.jpg

David-

One thing to be aware of is you are limited to 4,000 annual contributions per person, 8000 if you are married with a Roth. Even with the obvious Tax savings of a Roth that is not enough to ignore your 401k. The EGTRRA of 2001 peeled away a lot of the limits to 401k contributions.

For 2006 You can Contribute up to 15,000 pre-tax. Granted a lot can not afford that much, but believe me there is a benefit to maxing your Roth and then putting as much into the 401k as possible. The obvious is the more you put away the sooner you can retire....However there is a more complicated tax burden scenario to consider. You are making more now than you will in retirement. The tax burden on your earnings now are greater than they will be in retirement because your retirement distributions will be far less than your current income, you will pay less taxes on that money in the future than you would if you take it as net pay now. Also by investing it in your 401k you are hopefully repelling inflationary pressures on your current earnings versus future distributions.

The bottom line the extra $20 a week you put into your 401k will be taxed less when you retire and could be worth more than $20 today that you spend on something you won't remember anyway.

Ah, cool. I'm a broadcast journalist, myself! :wavey:

I'll keep you in mind next time I need a quick answer on WC Fields!

John - I was under the impression that when you withdrew $$$ from a conventional IRA after you retire, that the tax rate is based on what your highest salary was before you retired - am I wrong? Help please.

Two Answer a couple of questions.

Chili for 2006 the IRS sets the 403B limit at 15,000 the same as a 401k.

Paula You will be taxed at whatever your current tax rate is when you make withdrawals from an IRA or 401k after age 59.5

David is your sig from the Night Stalker? I LOVED that show....

isnt the money tax exempt until you withdraw it?

Yes it is and it is taken off of the top of your earnings the year you donate it - so it is not taxed then as well.

BTW - John, please correct me if if am wrong there as I am not a true expert :cool:

The individual and match money in a 401K or Traditional IRA is tax deferred until use at which time you will be taxed on it. If you choose to withdraw that money before age 59.5 you will be penalized an additional 10% penalty even in cases of hardship.

OK. So if I retire at 55, and then start taking money out of the Roth at age 60, then the tax rate will be based on whatever I'm making during retirement (obviously less than I had been making when I was working full time at age 30 or 40.)

What if I'm not retired yet - like, I'm still working full time at age 62 - but still take money out of my Roth at that time? It will be taxed based on my salary at age 62, which (hopefully) will be more than I was making at age 30 or 40. Correct?

Isn't this a cool thread?

We're all sharing love & light & knowledge! I'm getting all gooey inside.:blob2: :blob1: :]

I have a mis. magnet and it works great :cool: They are expensive though.

http://www.mosquitomagnetdepot.com/?source=google

Right - but the money put in is not taxed now as well if that is in a 401(K)

For example, if I make $60,000 a year and put $10,000 in my 401(K) - my Federal Income Tax rate is based on $50,000 less any deductions I may have. I think that is correct. What do you think?

You will be taxed at the rate of your earning at age 60 if retired and taxed at your rate of earning at age 62 if still working. However at either of those ages you can take the money for whatever reason you want with no penalty.

How fascinating! I had no idea such contraptions were available! I'm going to look into this. I would assume, though, that you want to place this a good distance from your windows & doors because it actually draws the bugs to it, right?

Yes. It essentially uses a butane tank to pass the gas over this strip which gives the effect of carbon dioxide, which is what attracts them to us. I think the directions state it should be placed many yards away from your house. Mine really works great. Changing the tank sucks, but that is better than the bites. Also, at times, there may be like 1,000 dead insects in the trap, so it works.

Ask Tom Delay.

You are right. Whatever your contributions are you will not be taxed on that amount that year. Only at time of withdrawal. The amount of withdrawal you will receive a 1099 for at the end of the year and you will add the amount to your earned income for that tax year.

I will make one very important point, that I have seen people get screwed on. They seperate from their employer, they take a lump sum withdrawal of their entire account balance with the intention of taking the entire amount and rolling it into an IRA or a new employer sponsored plan. However they get the check payable to them and not the IRA Fund or the Plan name. They are then repsonsible for all taxes and penalties even if they do roll it over. You may be able to reduce the taxes if you can prove roll over, but you can't avoid the penalty. Then when you finally do retire you end up getting taxed on it again. So the lesson.....never get the check made out you. Get it made out to the name of the fund or plan sponsor. This will ensure you pay no taxes or penalty.

LOL - I have seen that too. I did it awhile back for a variety of reasons and I actually made money because the market of the fund dropped by more than half, which was way more than the penalty and tax charged against my withdrawal. But, that was soooooo luck of the draw.

Also, thanks for the info.

BTW - how long do you think it will be until Congress gets rid of the $250,000 cap. gains exemption on the sale of a personalk res. after two years. I am betting that is coming soon.

Actually David, I am enjoying this thread so much because the dumbing down and sleazing down of the ledge has been a subject of consternation and depression for me. It is great to share and be shared here again.

I have seen that happen too. Would not count on it though. Saw it happen to a poor guy who was 52 and it was a massive setback.

BTW...I am not a licensed financial advisor. I am a Tax Attorney. I spend most my time trying to shelter income earned by Entertainers and Athletes within states and cities sheltered from state and city income taxes. Example if a New York Yankees ball player plays a game in Fenway Park then he faces Massachusetts income taxes for income earned in Massachussetts even though he is not a resident and his employer is not a Massachusetts employer. Also many cities have local taxes along the same lines. It is called the jock tax and it applies to entertainers' earnings as well. If you get technical it applies to the travelling ball boy as well.

My goodness, tax law :eek: I looked into it ans thought it would be the way to go, but chose another area.

Excellent warning, John Run. I left a company about eight years ago, & I took my 401(k) funds with me. But I had the check cut to USAA Investment Bank -- direct rollover to USAA mutual fund retirement account -- so I avoided all penalties.

My 401(k) currently is managed by Fidelity. Performance is fairly good, not great -- but then the whole stock market is pretty lethargic.

Me thinks paranoia is creeping up on ya...but then the Santa Ana River bed (aka the Orange County Mosquito Farm) IS pretty close to ya.

First off, NEVER burn a citronella candle indoors!!!

Once they're IN your house, a fly-swatter is the best. To keep them from coming in, make sure you keep your screen doors shut...spray Raid Yard Guard fogger around your patio daily...and burn 3 or 4 citronella candles (or Tiki Torches filled with citronella oil) on your patio nightly.

My hubby is a tax attorney also. he used to be at Kronish, Lieb, Weiner, and Helman in NYC. Then I got him to move back south :) Didn't realize there was a tax man on the ledge! Are you in Boston?

Being the science lab teacher that I am, I decided to try to tackle this one. Here is some interesting information I found on this topic.



An electric fan can keep mosquitoes away from a small area.

Air conditioning is a good a way as any to stop mosquitoes entering a house or a bedroom. They hate the cold weather and like to keep well away from it.

.
Mosquitoes are very responsive to smell and to infra-red light. Smoke coils that burn slowly throughout the night do work wonders and the mosquitoes tend to keep well clear of the area. Here though problems exist with coils often extinguishing themselves before dawn thus clearing the way for mosquitoes to enter. Infra red light lamps do work well, with the insects being drawn towards the light then being zapped by an electric wire mesh. I

We do not recommend using pesticides indoors to control mosquitoes. Exclude mosquitoes with tight-fitting screens and doors, and kill mosquitoes that come inside with a fly swatter.

Bats and martins eat tremendous numbers of insects, including mosquitoes; and martins prefer to live in colonies. However, neither of these animals will provide noticeable relief from mosquitoes. Plans for martin houses are available through your county Extension office.


Mosquitoes lay eggs in water, and the mosquito larvae develop in water. Find all of the sources of water around your home. Some mosquitoes breed in very small pools of water. Here are some common places to find mosquito-breeding sites around the home.

birdbaths
clogged gutters
old tires
watering cans
wading pools and other toys
stumps and tree holes
leaky faucets or drain outlets from air conditioning
saucers under flower pots
aquariums and ornamental ponds (all fish do not eat mosquito larvae)
Once you have identified the water sources, you have three nonchemical options.

Eliminate the water source. Fix leaks, fill in tree holes, or dispose of old tires.
Change the water every two or three days. Mosquitoes need 4-10 days in the water to develop. The larvae die without water.
Treat the water. Stock ornamental ponds with fish that will eat mosquitoes; consult your county Extension office. Treat the pond with Bacillus thuringiensis israelensis (BTI), a mosquito control agent that will not kill fish or other animals. Your county Extension office or garden center can help you find BTI products.

I work for my aunt/uncle's company called WoodGuard. http://www.wood-guard.com

I can answer any questions about maintenence free polymer coated lumber. We sell through Home Depot on the west coast (who is our biggest vendor)..making playsets, privacy fencing, regular fencing, patio covers, and just lumber for whatever your needs may be.

Lol

Chris

I'm a nurse. Work in a student health center. Any ?'s about STDs, morning after pill or vaccinations, I'm your gal. :D

I just found out the other day when I went to a "Sex chat" at my university, that our student health center gives the morning after pill for cheap, and condoms are free! So that's good to know..lol..we also had nice dicussions about sex toys and how to use them! (but there was free food--so thats likely why there was a turnout lol--oh yeah and the girl who speaking was hot)

Chris

Yeah, MAP is only $10 here. We do a pretty thorough interview & physical assessment before we give it out, though - kids think it's like eating candy, not realizing it's a med & there are risks involved. :rolleyes: ("Can I come & get it for my girlfriend?" Um, no. "Can I stock up on it in case I need it next week?" Um, no. "Can I get on birth control?" YES! PLEASE!)

We sometimes get free condoms, so we give them when we have them.