Home     Forum     401k     401k Rollovers
    Register   Login   Members   Search   FAQs     Recent Posts    




Social security tax on a roth?

This topic is locked: you cannot edit posts or make replies.
Money Talk > Taxes

Author Thread
marathon don
Member


Cash: $ 2.60

Posts: 11
Joined: 20 Nov 2008
Location: Denver, Colorado
Social security tax on a roth?  Reply with quote  

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
Post Tue Dec 09, 2008 3:41 am
 View user's profile Send private message
coaster
Senior Advisor


Cash: $ 1626.30

Posts: 7990
Joined: 11 Oct 2005
Location: Wisconsin
 Reply with quote  

No SS taxes on rollover. You've already paid those via payroll deduction.

~Tim~
Post Tue Dec 09, 2008 5:11 am
 View user's profile Send private message
BlankenshipFP
Money Talk Advisor


Cash: $ 79.56

Posts: 390
Joined: 05 Oct 2004
Location: Illinois
 Reply with quote  

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
Post Tue Dec 09, 2008 2:13 pm
 View user's profile Send private message Send e-mail Visit poster's website
coaster
Senior Advisor


Cash: $ 1626.30

Posts: 7990
Joined: 11 Oct 2005
Location: Wisconsin
 Reply with quote  

Thanks, Jim. Answering in haste and half asleep, I just repeated the OP's terminology. Conversion it is. Wink

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~
Post Tue Dec 09, 2008 2:39 pm
 View user's profile Send private message
BlankenshipFP
Money Talk Advisor


Cash: $ 79.56

Posts: 390
Joined: 05 Oct 2004
Location: Illinois
 Reply with quote  

It's your forum. Wink

Jim Blankenship, CFP, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
Post Tue Dec 09, 2008 3:19 pm
 View user's profile Send private message Send e-mail Visit poster's website
coaster
Senior Advisor


Cash: $ 1626.30

Posts: 7990
Joined: 11 Oct 2005
Location: Wisconsin
 Reply with quote  

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~
Post Tue Dec 09, 2008 6:55 pm
 View user's profile Send private message
BlankenshipFP
Money Talk Advisor


Cash: $ 79.56

Posts: 390
Joined: 05 Oct 2004
Location: Illinois
 Reply with quote  

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
Post Tue Dec 09, 2008 7:05 pm
 View user's profile Send private message Send e-mail Visit poster's website
coaster
Senior Advisor


Cash: $ 1626.30

Posts: 7990
Joined: 11 Oct 2005
Location: Wisconsin
 Reply with quote  

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? Laughing

Maybe he's in jail. Shocked


Meantime...


I think we've hijacked Don's thread. Twisted Evil


I really should go do something more constructive.......

~Tim~
Post Tue Dec 09, 2008 7:18 pm
 View user's profile Send private message
coaster
Senior Advisor


Cash: $ 1626.30

Posts: 7990
Joined: 11 Oct 2005
Location: Wisconsin
 Reply with quote  

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~
Post Wed Dec 10, 2008 3:55 pm
 View user's profile Send private message
oldguy
Senior Member


Cash: $ 733.45

Posts: 3566
Joined: 21 May 2006
Location: arizona
 Reply with quote  

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%.
Post Mon Dec 15, 2008 1:52 am
 View user's profile Send private message
coaster
Senior Advisor


Cash: $ 1626.30

Posts: 7990
Joined: 11 Oct 2005
Location: Wisconsin
 Reply with quote  

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~
Post Mon Dec 15, 2008 5:23 am
 View user's profile Send private message
oldguy
Senior Member


Cash: $ 733.45

Posts: 3566
Joined: 21 May 2006
Location: arizona
 Reply with quote  

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).
Post Mon Dec 15, 2008 2:36 pm
 View user's profile Send private message
marathon don
Member


Cash: $ 2.60

Posts: 11
Joined: 20 Nov 2008
Location: Denver, Colorado
 Reply with quote  

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. Thats the way Im looking at it.

And btw, does anyone have a recommendation on a good country to move to for at least four years? Very Happy
Post Wed Dec 17, 2008 3:09 am
 View user's profile Send private message
coaster
Senior Advisor


Cash: $ 1626.30

Posts: 7990
Joined: 11 Oct 2005
Location: Wisconsin
 Reply with quote  

Well, I don't know about the next four years (ya, I know you're j/k Wink ), 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. Rolling Eyes

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~
Post Wed Dec 17, 2008 4:39 am
 View user's profile Send private message
oldguy
Senior Member


Cash: $ 733.45

Posts: 3566
Joined: 21 May 2006
Location: arizona
 Reply with quote  

quote:
Meaning I much rather pay tax on 5K in wages than taxes on a possible 100k gain. Thats the way Im 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).
Post Wed Dec 17, 2008 10:46 pm
 View user's profile Send private message

Goto page 1, 2  Next
This topic is locked: you cannot edit posts or make replies.
Forum Jump:
Jump to:  
  Display posts from previous:      





Money Talk © 2003-2016