Backdoor Roth IRA conversion: Tax-free? – MarketWatch

When you make a nondeductible contribution to a traditional IRA and you immediately convert it to a Roth IRA, 100% of the conversion is nontaxable, right? Not necessarily.

You may be asking yourself, how it could be taxable since you didn’t get a tax deduction for the contribution to your IRA. What about the backdoor Roth IRA conversion strategy?

Before I get too far ahead of myself, let me back up and review some basics about taxation of deductible versus nondeductible IRA contributions and taxation of Roth IRA conversions that is relevant to this discussion.

Deductible vs. nondeductible IRA contributions

In 2013, the maximum you can contribute to all of your traditional and Roth IRAs is the lesser of a $5,500 or b your taxable compensation for the year. If you’re 50 or older, the limit is $6,500. You can make contributions to a traditional IRA until age 70-1/2.Without getting into details, the ability to take a deduction for part or all of a contribution to a traditional IRA is dependent upon three things:

  • Whether you’re covered by a retirement plan at work
  • Tax filing status
  • Amount of modified adjusted gross income “MAGI”

via Backdoor Roth IRA conversion: Tax-free? – MarketWatch.

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Build Wealth With Focus on Value, Thrift

As usual, Rick Kahler has written an article full of great, practical ideas.  In this article, he talks about the things we often do to save ourselves money which often turn out to do just the opposite.

Enjoy and Learn, Steve

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People who successfully build wealth have one trait in common: they understand the art of frugality.These unassuming millionaires know how to live on much less than they make, and they know how to save money. But those behaviors alone aren’t enough. Not spending money today does not always result in having more money tomorrow.

Frugality for its own sake can result in doing without things that matter to you, failing to take care of basic needs like your health, and living with a sense of deprivation. It can also lead to spending more money, not less, in the long run.Frugality for the sake of enhancing your life, on the other hand, features an eye for value. Most people who build wealth are masters at the art of getting value.

read the full article here: Rick Kahler: Build Wealth With Focus on Value, Thrift | Financial Awakenings.

Q&A

Steve –

I am such a neophyte in the area if investing.  It is new to me that I am taking on information like a camel with water and yet I think most of the information is useless and only filling what was for so long empty. I do not yet know what the information means or how to utilize it. Like the fact that IBM’s choices somehow predict what the S&P’s trend will be, 75% of the time. Is this useful information, is is trustworthy, is it taking up space in my brain where something of true importance should reside?

I truly just want to be able to look at the stocks I am now “committed” to and be able to tell whether they are going up or down and get a sense whether to leave the stocks be for 5 years or sell them etc. (is this to someone’s benefit other than mine?)

Thanks, Jim.

Jim –

It is impossible to know whether individual stocks will go up or down – over any period of time.

As we have discussed, your best bet for a good rate of return with minimal risk is a risk-appropriate, well-diversified portfolio of low-cost mutual funds.

You are worrying way too much about things that you have absolutely no control over.  You need to focus on the things that you can control and do them well.

Steve

How To Write an Ethical Will?

Writing an ethical will may seem difficult. However, it can be viewed as the writing of a love letter to your family. Ethical Wills can include personal and spiritual values, hopes, experiences, love, and forgiveness. It may well be one of the most cherished gifts you can give to your family.

Here are three basic approaches for creating your ethical will.

Approach #1

Using an outline structure and a list of items to choose from. This is by far the easiest way to get started and it can build your confidence quickly. You can create a rough draft to work from in less than an hour. The Ethical Will Writing Guide Workbook and The Ethical Will Writing Guide software were developed for this approach. This approach is also covered in Ethical Wills: Putting your values on paper.

Approach #2

Using guided writing exercises to help you create content for your ethical will. The Ethical Will Resource Kit contains several guided exercises to help you. Ethical Wills: Putting your values on paper contains even more exercises.

Here are some ideas to help you get started.

via How To Write an Ethical Will?.

Active vs. Passive Investing | | Bell Wealth Management

The investment world has reached a watershed moment. Recently, one of the largest pension funds in the world announced that it was considering moving to an all-passive portfolio. For the average individual investor, this might seem like a “yawner” of a headline, but the eventual outcome has major implications for the most fundamental question in investing: Which is better—active or passive? Simply put, active management is performed by those investors who believe that they can outperform “the market” by using fundamental and/or technical analysis to pick individual investments that will outperform a particular benchmark e.g., S&P 500 Index. Passive management, on the other hand, does not try to beat the market. Rather, these investors attempt to capture the average market return with as little risk and expense as possible. The California Public Employee Retirement System CalPERS is the big kahuna of pension funds. Just as you invest your 401k money in stocks and bonds, the professionals at CalPERS invest money for the teachers and other public servants of the State of California. Since they are responsible for over $250 billion in assets, it becomes headline news in the industry when they make a change. Currently, CalPERS has about 60% of their assets in passive strategies and 40% in active strategies.

via Active vs. Passive Investing | | Bell Wealth Management.

A Billion-Dollar Misunderstanding (in Gold) – On Retirement (usnews.com)

By Daniel Solin

April 25, 2013 RSS Feed Print

There are small misunderstandings, like the one chronicled by Robert Grover in his cult book, “One Hundred Dollar Misunderstanding”. Then there are really big ones.

The miscalculation by hedge fund gurus John Paulson and David Einhorn relating to the price of gold falls into the latter category. According to an article in Forbes, Paulson had a paper loss of around $1.4 billion on his gold investment this year, although he still has a gain since he created the gold share class for his hedge fund in 2009 when gold was selling at $950 an ounce.

David Einhorn, who runs hedge funds (including a dedicated gold fund) at Greenlight Capital Management, also bet heavily on gold. According to Reuters, Einhorn’s investment in gold was recently listed as its third largest position in its main fund.

via A Billion-Dollar Misunderstanding (in Gold) – On Retirement (usnews.com).

Active vs. Passive Investing | | Bell Wealth Management

The investment world has reached a watershed moment. Recently, one of the largest pension funds in the world announced that it was considering moving to an all-passive portfolio. For the average individual investor, this might seem like a “yawner” of a headline, but the eventual outcome has major implications for the most fundamental question in investing: Which is better—active or passive?

Simply put, active management is performed by those investors who believe that they can outperform “the market” by using fundamental and/or technical analysis to pick individual investments that will outperform a particular benchmark (e.g., S&P 500 Index). Passive management, on the other hand, does not try to beat the market. Rather, these investors attempt to capture the average market return with as little risk and expense as possible.

The California Public Employee Retirement System (CalPERS) is the big kahuna of pension funds. Just as you invest your 401(k) money in stocks and bonds, the professionals at CalPERS invest money for the teachers and other public servants of the State of California. Since they are responsible for over $250 billion in assets, it becomes headline news in the industry when they make a change. Currently, CalPERS has about 60% of their assets in passive strategies and 40% in active strategies.

via Active vs. Passive Investing | | Bell Wealth Management.