| Social security tax on a roth? |
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marathon don
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| Social security tax on a roth? |
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I am getting ready to roll from a traditional IRA to a Roth and will have to pay 33% in Fed taxes.
It is my understanding that SS taxes are on wages and not on this rollover. I am correct? If they do pertain to this rollover are they included in the 33% tax or do I pay seperately and how?
Just trying to avoid any penalty for under payment of SS tax. I've never heard of one.
Thanks in advance,
MD
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Tue Dec 09, 2008 3:41 am |
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coaster
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No SS taxes on rollover. You've already paid those via payroll deduction.
~Tim~
Eye Candy : Why Whimsy
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Tue Dec 09, 2008 5:11 am |
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BlankenshipFP
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coaster is absolutely correct about the OP's question. Not to pick nits, I just wanted to clarify something about the language: OP is going to perform a "conversion" from a trad IRA to a Roth IRA, not a "rollover". The two activities are vastly different in their tax treatment.
We now return you to your regular programming...
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Tue Dec 09, 2008 2:13 pm |
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coaster
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Thanks, Jim. Answering in haste and half asleep, I just repeated the OP's terminology. Conversion it is. 
I suppose if I weren't still in a hurry that could generate a post about the general confusion surrounding what the OP calls "Social Security taxes" and what the government calls something else, maybe because they don't want the taxpayers to think of it as a tax?
~Tim~
Eye Candy : Why Whimsy
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Tue Dec 09, 2008 2:39 pm |
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BlankenshipFP
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It's your forum.
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Tue Dec 09, 2008 3:19 pm |
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coaster
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Ummmm.....I didn't understand. You referring to The Bill Sebastian Forum? That I should post that there? Hmmmmm.....maybe I'll add that to the list of opinion pieces I want to post. Some time. Right now I'm just too damn busy trying to get the thing into shape and up and running. If I'd known it would take this long, I never would have done it.
~Tim~
Eye Candy : Why Whimsy
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Tue Dec 09, 2008 6:55 pm |
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BlankenshipFP
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I just meant that you seem to have a good grasp on everything going on in this forum, you nearly "own" it.
I haven't checked out the Bill Sebastian forum - who is Bill Sebastian (no slight intended)?
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Tue Dec 09, 2008 7:05 pm |
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coaster
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Well, Mark owns it, though I wonder where he's been. I've only seen his username listed once in months. Somebody's paying the hosting bills. Somebody must be keeping the software and database up and running. Mark, oh Mark, wherefore art thou, Mark? 
Maybe he's in jail. 
Meantime...
I think we've hijacked Don's thread. 
I really should go do something more constructive.......
~Tim~
Eye Candy : Why Whimsy
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Tue Dec 09, 2008 7:18 pm |
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coaster
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quote:
Originally posted by BlankenshipFP
- who is Bill Sebastian?
Sorry, I forgot to answer this. He's host of a popular talk show on a local radio station: http://www.whby.com
~Tim~
Eye Candy : Why Whimsy
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Wed Dec 10, 2008 3:55 pm |
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oldguy
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quote:
I am getting ready to roll from a traditional IRA to a Roth and will have to pay 33% in Fed taxes.
Not part of your question - but why on earth would you convert a Trad IRA to a Roth while you are in a 33% tax bracket?? Plus your state income tax? Likely another 5% to 7%?
You don't have to pay tax on this until age 70 1/2, you can let the whole fund compound - then at age 70 1/2 you can sell a little each year probably for 15%.
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Mon Dec 15, 2008 1:52 am |
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coaster
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Could be he wants to convert and now is a good time because of the market declines. A lower tax rate but at a higher gain might net out to more later. Plus there's no way of knowing what the tax rates will be at that age.
~Tim~
Eye Candy : Why Whimsy
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Mon Dec 15, 2008 5:23 am |
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oldguy
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quote:
A lower tax rate but at a higher gain might net out to more later.
It would be a mistake to look at minimizing the taxes - look at maximizing what is left for you after taxes.
I would keep the IRA, leave that 40% invested inside the IRA, let it double or triple over the next decades, and then pay about 15% on it when I have to sell my RMDs (which I now have to do).
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Mon Dec 15, 2008 2:36 pm |
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marathon don
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My email gave me no indication this thread was on going and I appreciate the replies.
Tim thanks for the reply you posted weeks ago.
To answer oldguy. I did the conversion based on current and projected economic and political events. I have what I hope to be several more working years ahead of me. I am of the mindset to pay taxes on the seed (after tax contributions) and not the harvest (tax free gains). Meaning I much rather pay tax on 5K in wages than taxes on a possible 100k gain. That’s the way I’m looking at it.
And btw, does anyone have a recommendation on a good country to move to for at least four years? 
Thanks in advance.
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Wed Dec 17, 2008 3:09 am |
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coaster
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Well, I don't know about the next four years (ya, I know you're j/k ), but I read a lot of retirees are moving to Mexico so their money goes further. San Miguel de Allende is a real ex-pat hot spot.
So, the Mexicans are moving here and the Americans are moving there. Go figure. 
Sorry you didn't get the email notification. I'm a mod and I miss about a third of mine, too. This is a frequent problem with phpBB boards.
~Tim~
Eye Candy : Why Whimsy
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Wed Dec 17, 2008 4:39 am |
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oldguy
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quote:
Meaning I much rather pay tax on 5K in wages than taxes on a possible 100k gain. That’s the way I’m looking at it.
It doesn't work that way. You are giving up $2000 to taxes, and leaving only $3000 to grow to $60,000. If you left the whole $5000 to grow it would be $100,000 with $15,000 due in taxes, ie $85,000 net (better than $60,000 net).
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Wed Dec 17, 2008 10:46 pm |
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