DeluxeXL t1_jegk5lf wrote

There is no capital gain tax treatment in a retirement account. If a portion of withdrawal is subject to tax, it is going to be ordinary income tax.

  1. Withdrawing contributions: No tax, no penalty.
  2. Withdrawing taxable conversions: No tax. 10% penalty within 5 years.
  3. Withdrawing nontaxable conversions: No tax, no penalty.
  4. Withdrawing earnings: Taxed as income. 10% penalty for unqualified withdrawal.

How much do you expect the Roth IRA to grow before you withdraw?

Also, are you going to become "nonresident alien"?


DeluxeXL t1_jegj1r0 wrote

Reply to comment by scccc- in Roth 401k Rollover to Roth IRA by scccc-

Unless you spoke to the plan rollovers department (someone at Fidelity finally gave me their number after I complained that I was transferred over 15 times), most of them don't really know the tax stuff.


DeluxeXL t1_jegiazj wrote

When you are on Fidelity, click News & Research, Mutual Funds. Then screen the funds to only money market funds, Fidelity funds only, require less than 2.5k initial investment, you get 11 funds in the list.

Switch the view to "Daily pricing / yields" to see the 7-day yields. Sort by this 7-day yield.

Apply the "50% rule" (If a fund contains less than 50% of the thing that makes it tax-exempt, it is completely not tax-exempt). I know only FDLXX has >50% in US Treasury and US Gov Obligations. All of the funds above it in the list are dominated by Repurchase Agreements, which are not state tax exempt.

Then it's just a matter of multiplying the numbers. Example: 4.54% x (1 -0.24 -0.093) = 3.03%


DeluxeXL t1_jegh5g1 wrote

You quoted the rules for withdrawing earnings. Conversions are not earnings.

If you contributed $12000 directly to Roth IRA, you can withdraw $12000 any time.

If you converted $6000 from a 100% nondeductible traditional IRA to Roth IRA, you can withdraw $6000 any time after you have already withdrawn the $12k Roth contributions.

Contributions and conversions are always withdrawn first before earnings are withdrawn.

Refer to Form 8606 lines 22 (for direct contributions) and 24 (for conversions).


DeluxeXL t1_jegglkr wrote

I believe the state income tax rate that corresponds to 24% federal in California is 9.3%.

>Fed: 24%

>CA: 9.3%

Fund SEC yield as of 3/30 Federal exempt State/Local exempt less FIT and SIT+LIT After-tax yield
SPRXX 4.54% 0% exempt 0% exempt -0.24 -0.093 3.03%
FDRXX 4.50% 0% exempt 0% exempt -0.24 -0.093 3.00%
SPAXX 4.48% 0% exempt 0% exempt -0.24 -0.093 2.99%
FZFXX 4.46% 0% exempt 0% exempt -0.24 -0.093 2.97%
FDLXX 4.22% 0% exempt ~94% exempt -0.24 -0.00558 3.18%
FTEXX 3.87% 100% exempt 0% exempt -0.00 -0.093 3.51%
FMOXX 3.81% 100% exempt 0% exempt -0.00 -0.093 3.46%
FABXX 3.30% 100% exempt 100% exempt -0.00 -0.00 3.30%

DeluxeXL t1_jeged32 wrote

> * After 5 years, I can withdraw money without taxes and penalty. This will save me 15% capital gains taxes. > * Before 5 years, I'll need to pay taxes on earnings and 10% penalty.


  1. You already paid tax when you earned the income.
  2. When you contribute to traditional IRA, you do not take a tax deduction, making the contribution "nondeductible".
  3. When you convert to Roth IRA, you won't pay any more tax since the entire IRA is filled with only nondeductible contribution. The only exception is if you allow the earnings to pile up before converting.
  4. Since the conversion was not taxable, you don't need to wait 5 years to withdraw.

DeluxeXL t1_jegcn1f wrote

Reply to comment by scccc- in Roth 401k Rollover to Roth IRA by scccc-

It is going to maintain exactly the same balance type. Roth to Roth rollover follows a simple rule: Every type of balance keeps its own identity. Roth 401k contributions become Roth IRA contributions. Roth 401k conversions (such as megabackdoor Roth) become Roth IRA conversions. Roth 401k earnings become Roth IRA earnings.

There is no tax now.

There is no tax ever (assuming you only do qualified withdrawals).


DeluxeXL t1_jegbg6b wrote

It is likely the Roth earnings, considering that the only valid destinations are Roth IRA or Roth IRA. Calling it pretax is just weird.

If it were pretax employer match, valid destinations would have included traditional IRA.


DeluxeXL t1_jega925 wrote

Growth in Roth IRA is completely tax-free assuming you only do qualified withdrawals.

Growth in traditional IRA is tax-deferred until you withdraw or convert. Then it's treated as ordinary income when you withdraw or convert.

Also, since you use Vanguard, did you know Roth conversion is as simple as clicking "Convert to Roth IRA" on the traditional IRA? It'll lead you to a page where you select what things to convert to Roth IRA. You can convert money or shares without needing to sell.


DeluxeXL t1_jeg6der wrote

>Fed: 24%

>NY: 6.25%

>NYC: 3.876%

Since you use Fidelity,

Fund SEC yield as of 3/30 Federal exempt State/Local exempt less FIT and SIT+LIT After-tax yield
SPRXX 4.54% 0% exempt 0% exempt -0.24 -0.10126 2.99%
FDRXX 4.50% 0% exempt 0% exempt -0.24 -0.10126 2.96%
SPAXX 4.48% 0% exempt 0% exempt -0.24 -0.10126 2.95%
FZFXX 4.46% 0% exempt 0% exempt -0.24 -0.10126 2.94%
FDLXX 4.22% 0% exempt ~94% exempt -0.24 -0.0060756 3.18%
FTEXX 3.87% 100% exempt 0% exempt -0.00 -0.10126 3.48%
FMOXX 3.81% 100% exempt 0% exempt -0.00 -0.10126 3.42%
FAWXX 3.70% 100% exempt 100% exempt -0.00 -0.00 3.70%

DeluxeXL t1_jef3ns3 wrote

That's fine. Just contribute money from taxable brokerage account to IRA. You may have to wait for the deposit to settle in the taxable brokerage account first.

Alternatively, contribute from your bank account and then withdraw from the taxable brokerage account.


DeluxeXL t1_jef2w5t wrote

Depends on the source of the transfer. If it was not a tax-advantaged account, you can just contribute normally to IRA from any non-tax advantaged account. For example, moving money from taxable brokerage to IRA is still a normal contribution. It doesn't have to come from a bank account.


DeluxeXL t1_jeen1d9 wrote

The fact that your paychecks are still not $0 means you haven't reached maximum withholding. Maximum withholding is 100% of your paycheck.

Also, you haven't mentioned

  • the amounts of your FIT withholding and your spouse's FIT withholding.
  • the amounts of your pretax deductions and your spouse's pretax deductions. (Pretax deductions are things like health insurance, FSA/HSA, and pretax 401k)

(Supply the amounts for 2022 if your question is focused on 2022)


DeluxeXL t1_jea6phy wrote

You're looking at the nominal values, which is hugely misleading when discussing something that spans multiple decades. That 900 euro years from now isn't going to be worth much due to inflation. It's worth less than half after 36 years.

Instead, focus on the interest rate. You're the borrower now. Interest is the "rent" on the borrowed money. If you were the lender, you would want the borrower to pay you back a fair amount, too.

>Loan of €250,000 €27,000 initial deposit Pay back ~€900 per month for 38 years

Interest rate is =RATE(38*12,-900,250000)*12 = 2.86%. I don't know if this is considered low in Europe, but this is a very low rate in the US. There are plenty of things that yield more than 2.86%, including many risk-free instruments such as government bonds. This rate is even on par or below inflation. Assuming your income rises with inflation, you're actually spending less and less fraction of your income on home loan each year.


DeluxeXL t1_je8hg4l wrote

> But that’s what I’m here asking

You said $24k was out of pocket.

$55k was the AGI.

7.5% of $55k is $4125.

$24k - $4125= $19875.

Do you have anything else to itemize? Such as

  1. $19875: medical expense
  2. $_____: charitable donations
  3. $_____: property tax, real estate tax, etc.
  4. $_____: either state income tax or state sales tax (#3 and #4 are capped at $10k together)
  5. $_____: mortgage interest
  6. $_____: losses in federal disaster areas
  7. $_____: gambling losses

If your total itemized deduction exceeded $25900 (standard deduction for MFJ), take the itemized deduction.

> Does it matter that the $24,000 was a gift?