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I am a PF blogger at JoeTaxpayer.com and frequent visitor at Moolanomy.

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Total Points: 140

Questions Asked: 1

Answers Given: 92

Best Answers: 2

Economic recovery?

When will the depression end?

Asked in: Personal Finance - 295 days ago - 2 answers

Converting Traditional IRA to Roth

Is there any rule of thumb when it does/doesn't make sense to convert a traditional IRA to Roth IRA? For example, 1) if your AGI is > $XXX, then do not convert. 2) If you're over 55 and your timeframe for drawing the funds is < YYY years, then do not convert. I'm currently have a nice size traditional IRA and when using one of the online conversion tools (e.g. Fidelity), I would have to pay a pile of taxes but over the long term it would be beneficial. Hard pill to swallow!

Asked by: rcsretirement in Personal Finance - 17 hours ago

JoeTaxpayer's Answer

Hey, that was my guest post here. I just took a look at it, and the advice stands. If you shared specific details, that advice might get adjusted a bit. The intent when I wrote it was to hit the widest audience possible. Factors such as age, income (actuall current net taxable), and current savings would help tweek the analysis. Keep in mind, it's not an 'all or none' decision. Those for whom the Roth conversion makes sense should almost certainly choose the amount very carefully, not convert 100%.

Answered 10 hours ago

Backdoor Roth IRA contributions using traditional IRA

I had a traditional IRA funded entirely with non-deductible post tax money which I converted to a Roth IRA today. As I am still above the MAGI income level to be allowed to contribute new monies to the Roth IRA, am I allowed to make a non-deductible contribution to my traditional iRA and convert that to my new Roth in future years?

Asked by: jto410 in Financial Planning - 5 days ago

JoeTaxpayer's Answer

Yes. So long as the IRA balance is lower than your deposits, i.e. no gain, there will be no tax due. Yes, you can deposit each year coming and quickly convert, paying tax on only the accrued interest in the days in between if you do it quickly. 2010 = chance to defer the income over 2 years, but this is moot for you. Future years no deferral, but the income limit on conversion is still lifted. Sorry Kathy, your reply is not how I understand this. And I have a bumper sticker "friends don't sell friends VAs." The fees negate any tax deferal benefits. I understand they are good for a select type of client, I've just never met one.

Answered 4 days ago

Backdoor Roth IRA contributions using traditional IRA

Asked by: jto410 in Financial Planning - 5 days ago

JoeTaxpayer's Answer

kathy - since the OP can't deduct his IRA, he implies he has a 401(k) (or 403(b)) at work. $16,500 if he's under 50 plus the $5,000, total $21,500. He made no mention of looking for anything else. That said, I'm interested to see a prospectus for a VA you'd recommend. With long term cap gain rates at 15%, even a 401(k) with above average fees can wipe out the tax deffereal feature. Add a mortality expense, and the other layers of fees, and I yet to find a VA that makes sense. (Correction - Jefferson National offers one with a $240/yr expense, meaning an investment of over $50K has an expense of less than .5% and less than .25% for $100K+, etc.) Articles I read indicate that VAs average over 1.5% in addition to the fees of the underlying funds. Why are prospectuses so difficult to find when it comes to these accounts? And how does one justify an extra 1%/yr for 30 years? I was shown one prospectus that when all was added up, the fees (including fund fees) were over 4%. Wow.

Answered 4 days ago

Backdoor Roth IRA contributions using traditional IRA

Asked by: jto410 in Financial Planning - 5 days ago

JoeTaxpayer's Answer

Kathy, I have to say, I missed it the first time, but my Spidey senses usually go off when I see/hear anyone using terms like "Many of the smartest, wealthiest investors use...." It usualy precedes a sales pitch for a product that's questionable, and sets the buyer up for affinity fraud a la Madoff. Can you imagine my recomending say, the SPY ETF, and using that phrase, instead of discussing expenses, P/E ratios, long term expectation, risk, tax consequences, etc? I remain curious about the product you recommend. Specifically, underlying fund choices, and a list of all the expenses the buyer would pay, the guarantees offered in return, etc. That would be the focus of a fact based discussion.

Answered 4 days ago

Backdoor Roth IRA contributions using traditional IRA

Asked by: jto410 in Financial Planning - 5 days ago

JoeTaxpayer's Answer

Re: The IRAs, you got it right. If you are above the limit to deduct, you are a candidate for the Roth via fast conversions. No reason not to do this. I have an ILIT as well, but it buys term insurance. Different topic than the IRA, but curious what made you decide to buy the whole life insurance. Second to die? That implies you have kid(s) and want to leave them money, which is fine, but for most people their insurance needs start to fade after the kid graduates college, the house is paid, etc. Which is why my term is timed so I probably won't renew at that point. Curious what your approach is.

Answered 3 days ago

Can I fund a 401K and an IRA and a Roth for 2009

I'm 65 and, for 2009, I have funded the $6000 limit to my Roth IRA; I also have a bit over $10K to my 2009 401K. What, if anything can I contribute to my regular IRA for 2009?

Asked by: LomasB in Taxes - 7 days ago

JoeTaxpayer's Answer

Zero. The IRA limit is accross both types of accounts. If you have a age 50+ spouse you can fund $6000 in their account, $5000 if under 50. Sorry, good job on the savings.

Answered 6 days ago

Can I deduct money lost in the stock market in 2009 tax return?

I lost about 10000 dollars in the stock market in 2009. Can I deduct those losts in the tax return

Asked by: JAMO10 in Taxes - 37 days ago

JoeTaxpayer's Answer

THe losses first cancel out any stock gains you had (I hope). Then you take $3000 of that loss each year against ordinary income, and carry the rest foreward till next year. With no gains, this will take into the 4th year to use it all up.

Answered 37 days ago

Pay mortgage with IRA

I am age 61. Have mortgage of 85k. Have 150k in Trad IRA. That is 25% of investment account. Should I pay off mortgage with IRA funds?

Asked by: KathRand in Miscellaneous - 47 days ago

JoeTaxpayer's Answer

Kath - more important, what does the rest of your income look like? Married/single? First, understand what tax you will have to pay on any withdrawal. If you don't understand how marginal rates work, that's the first step, you need to first understand the cost of this vs the alternative options. If the mortgage rate is high, and can't be refinanced, paying 10% or even 15% to get that money may not be the worst thing, but 25%, no. So once we know more details, one possibility is to retire this mortgage spread out over a few years. Where is the other 75%?

Answered 47 days ago

Can we afford to buy a house?

My husband and I have 2 kids and are wanting to buy a house this yr. because our apt. is getting too small for all of us. We have $7,000 in credit card debt, but other then that we have no other debt. My husband has no negative marks on his credit. He works full time and makes $35,000 a yr. I am a stay at home mom. Do you think we will be able to buy a house this yr.?

Asked by: mazakis27 in Real Estate - 55 days ago

JoeTaxpayer's Answer

He grosses close to $3K/mo. In normal times, 30% or about $900 can go toward the mortgage (and prop tax). If $750/mo goes to the mortgage, this would buy you $140,000 mortgage at 5% fixed 30 year. I think if you are in an area where there are foreclosures and found a short sale where the bank is just happy to get a family with steady income, you might get in, no money down. I'm not suggesting you move forward, just telling you that it's not out of the question. You don't mention where you live, or what homes are going for.Good luck, let us know how you do. Joe

Answered 55 days ago

How to find an old 401k account

I put money into a 401k at Five Star Heating and Air and forgot about it. I haven't worked there for years and I need to know if is still in existence I have no paperwork or account numbers.

Asked by: cindyp in Financial Planning - 56 days ago

JoeTaxpayer's Answer

Your money just doesn't vanish. The company itself didn't have it, the 401(k) would be held by a custodian, Vanguard, Schwab, Hewitt, etc. And they likely track it by your Social Security number. Contact your former employer and ask who the 401(k) administrator/custodian is, then contact them directly. Let us know here how you do. Then we'll tell you how to move it to an IRA in your name.

Answered 56 days ago

At wits end? Rental property and debt problems

Hi, I am truely overwhelmed. About 3 yrs. ago I refinanced my personal residence to purchase a rental property. Paid cash for it and took loans and savings to rehab it. Got it rented but I do not have a Cof O. Shortly after that I purchased another rental unit with 3 units. I financed the down payment and at closing found it was a baloon. I went ahead with the deal despite thinking this was not good. Shortly after I purchased a burnout that needed alot of work (more than I anticipated) I took a HELOC on the 1st rental to pay for assorted repairs there. I also used 0% cc offer to fi nance some of the project. I thought I woud be able to get it up and running then refi. that oops. After that I bought 1 more 2 family and moved from my principal residence of 20 + years with still some work to do there. All the places are rented currently but I am overwhelmed with the debt I have taken on and the additional repairs that need doing. I alos used a HELOC on the last purchase to pay down the balloon. At the time I was employed in a good job and figured I would get to things a little at a time. As for debt I have 15K with BA 15K with Home improvement loans from CITZENS 60K on the HELOC with BA and a 15K HELOC on my new principal residence. When all rented the properties cashflow about 1000 per month. I dont feel any way out right now with my decreased earnings and the upcoming repairs much less a few vacancies. The properties are all in good areas and most of the tenants are decent. Unf ortunately they were overvalued at the time I bought them. I have about 10K in a ML account 10 K left ion one HELOC and 15 K left on another HELOC. Not enough $ to make all needed repairs. There is about 50K in equity in one place even though I will lose about 20K on that. So what to do? Sell it and pay off debt? Sell it fix one place and file BK.? Drain the ML acct. fix the one place and file BK.? Tap the rest of the HELOCS then file BK? I just see this as a slow death financially. I am trying to keep a roof over my head and not be completely drained.Any ideas ? Thnx

Asked by: stc14620 in Real Estate - 71 days ago

JoeTaxpayer's Answer

You need to stop and take a breath. The question is: what are you willing to do to fix this? My first answer is that you need to stop making one mistake after the next. It's very possible you come out the other side just fine, but I see you going from one issue to the next. The CofO? How in the world do you just move on when you don't have a valid certificate of occupancy? Fix this first. It's an accident waiting to happen. How do you get a loan whose terms you don't know? A balloon is a valid loan, but not for most people. A variable is the same in that it's not for everyone. I suggest you first list exactly what's owed on each property along with the price you can get if you sold. Figure out if there's any opportunity to negotiate with the banks. They'd rather get a monthly check than take a loss. Where are you living? If it's not in the tiniest apartment you own, move into that one or take in a roommate. Then commit to working80 hrs per week putting in the sweat to make any upgrades that would rent an empty unit or ungrade existing ones. When there's nothing left to do, get a second job and after a reserve fund is built up, start to pay off the highest rate loans a bit faster. We are near the bottom, and if you hang in there, you stand a good chance to do well. Let us know how you progress. Joe

Answered 70 days ago

Over Contribution to Roth IRA, pay the penalty or withdraw?

I paid into the Roth IRA as usual. I got a substantial change in income unexpectedly that put me over the eligibility limit. Should I just pay the penalty, or can I somehow withdraw those funds, pay tax on gains, and then put it somewhere else?

Asked by: Kevin F in Personal Finance - 93 days ago

JoeTaxpayer's Answer

An ineligible deposit is subject to a 6% penalty each year, not just the year of deposit. You should; Withdraw, pay tax on gain. Deposit to a traditional IRA, non-deducted, of course. On Jan 2, convert the balance to Roth, as the rules for conversion change next year. Note: I believe this to be accurate, but I don't find evidence to provide backup. I hope another poster will provide a double check on this. Given this, be sure to first confirm the facts before acting. Joe

Answered 93 days ago

Should I pay off my mortgage with HELOC?

Should I pay off all or most of my mortgage payment from the HELOC. I have a 15 yr 5.375 fixed mortgage. I have 12 years left. Right now my payment goes 50% to principal and 50% to interest. I also have a HELOC which is below prime (2.75%, 20 year, 10 year draw). If I pay off all or most of my mortgage from the HELOC, my monthly payment goes down a lot and also total amount paid goes down. Should I do it? I am worried if my FICO score is going to be ruined. Also, I plan to get new mortgage to buy a place since I got married recently. My goal is to reduce monthly payment and prepare for a new mortgage. Is debt in mortgage vs HELOC treated differently by FICO? Any suggestion will be great help. Thanks in advance … DB

Asked by: DB in Credit and Debt - 93 days ago

JoeTaxpayer's Answer

Erica is right. The fact that you are planning to buy a new house is enough reason to not make any move right now. But - with 12 years left on that mortgage, I'd recommend against using the HELOC to pay it off anyway. I don't know when rates will rise again, but 2-5/8 rise can happen rapidly once rates start to move. If you said you were staying there AND were able to pay the whole thing off in 2-3 years, then maybe it would pay off, but given your circumstance, no way, my friend. Joe

Answered 89 days ago

Should we buy a home outright when we move?

I currently live in MA and my wife and I are planning on moving to Florida as soon as we can find jobs down there. I am a CPA and she has an MBA. So while jobs are hard to come by in every state I think eventually we will be able to find something. I bought a condo years ago in MA which we will be selling and through some inheritance, savings and proceeds from the sale of the condo in MA we could buy a home outright in Florida for $300K, still have over $100K in liquid assets (cash and CDs) and aprox $230K in our retirement funds. We are 34 and 32 years old respectively. I am very seriously considering buying a home outright when we move. We will still have plent of liquid assets as well as money in the market from our retirement funds. We have no kids currently, but paln on having 1, maybe 2 someday. What do others think about this plan?

Asked by: EricK in Real Estate - 99 days ago

JoeTaxpayer's Answer

I live in MA as well. When a coworker mover to Austin, I advised just that. "The 50% equity you have in your home now is enough to buy you a house outright in Austin. The new tax laws exempt $250K (single) so you have no tax due on the gain you have. Think how much more comfortable life will be with no mortgage payment at all." Advice was taken. You have a unique situation. I am 47 and still have about 7 years to go on our mortgage. To be your age especially and mortgage free is more than wonderful. Keep in mind, others may suggest you take the low interest mortgage and keep investing. Don't do it. You have 2 kids years from now, imagine how great the flexibility that one of you can stay home for years with no worries about money. Your plan is great, I wish you well.

Answered 99 days ago

Should I roll my 401K over to a Roth IRA and then take out the money?

I got laid off last month. Should I roll my 401K over to a Roth IRA and then take out the money. This to pay of my car/credit card have some money for mortgage and maybe put $5000 in individual stocks? 36 with only $42000 in 401K total.

Asked by: Charles in Personal Finance - 111 days ago

JoeTaxpayer's Answer

Rolling it to the Roth will incur income tax on the full amount. Taking it out will then have a 10% penalty. The stop in the Roth is pointless. What is the money in now? If the 401(k) doesn't have inexpensive options for you, I'd suggest you transfer it directly to a Traditional IRA. Even if you said you absolutely needed this money taken out, you shouldn't do that in 2009. Why add this as income when you worked most of this year? $42K isn't very much if this is your entire savings. Don't take any withdrawal. Do your best to find new work.

Answered 111 days ago

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JoeTaxpayer's Profile

893

Economic recovery?

Converting Traditional IRA to Roth

JoeTaxpayer's Answer

Backdoor Roth IRA contributions using traditional IRA

JoeTaxpayer's Answer

Backdoor Roth IRA contributions using traditional IRA

JoeTaxpayer's Answer

Backdoor Roth IRA contributions using traditional IRA

JoeTaxpayer's Answer

Backdoor Roth IRA contributions using traditional IRA

JoeTaxpayer's Answer

Can I fund a 401K and an IRA and a Roth for 2009

JoeTaxpayer's Answer

Can I deduct money lost in the stock market in 2009 tax return?

JoeTaxpayer's Answer

Pay mortgage with IRA

JoeTaxpayer's Answer

Can we afford to buy a house?

JoeTaxpayer's Answer

How to find an old 401k account

JoeTaxpayer's Answer

At wits end? Rental property and debt problems

JoeTaxpayer's Answer

Over Contribution to Roth IRA, pay the penalty or withdraw?

JoeTaxpayer's Answer

Should I pay off my mortgage with HELOC?

JoeTaxpayer's Answer

Should we buy a home outright when we move?

JoeTaxpayer's Answer

Should I roll my 401K over to a Roth IRA and then take out the money?

JoeTaxpayer's Answer

How do you calculate you effective tax rate?

JoeTaxpayer's Answer

Utility Costs

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