Dalpa R&I Roadshow
#181
My 401a has had significant gains to date. THOSE are taxable, and must be converted in ratio to the number of post tax dollars. It is not a good deal in my case, and I would guess anyone that has been around awhile it isn't either.
I'll pay the taxes later, at a lower rate.
I'll pay the taxes later, at a lower rate.
To your earlier question, Falcon hit 2 great reasons for the MBD Roth IRA. A 3rd reason is that you expect to be in a higher tax bracket in the year you withdraw the funds. You may not routinely exceed your former income tax bracket, but you may have business income, investment income or sale of appreciated assets outside of a tax sheltered account like stocks, mutual funds or real estate. These gains may put you in a higher tax bracket so withdrawing Roth vs Traditional funds that year may make more sense. Some pilots also have businesses and investments that provide huge tax deductions against their W-2 Delta income and puts them in a lower tax bracket some years.
#182
Gets Weekends Off
Joined APC: Nov 2011
Posts: 4,535
My 401a has had significant gains to date. THOSE are taxable, and must be converted in ratio to the number of post tax dollars. It is not a good deal in my case, and I would guess anyone that has been around awhile it isn't either.
I'll pay the taxes later, at a lower rate.
I'll pay the taxes later, at a lower rate.
#183
Roth IRA money is after tax and has less restrictions. I use my Roth account as my “6 month rainy day” fund. The contributions can be withdrawn at any time for any reason.
It also balances the tax obligation and gives you more flexibility to control your tax liability after retirement. The Roth 401k works similarly but you probably already know this. The post is mainly for those who don’t.
It also balances the tax obligation and gives you more flexibility to control your tax liability after retirement. The Roth 401k works similarly but you probably already know this. The post is mainly for those who don’t.
#184
Gets Weekends Off
Joined APC: Nov 2011
Posts: 4,535
Roth IRA money is after tax and has less restrictions. I use my Roth account as my “6 month rainy day” fund. The contributions can be withdrawn at any time for any reason.
It also balances the tax obligation and gives you more flexibility to control your tax liability after retirement. The Roth 401k works similarly but you probably already know this. The post is mainly for those who don’t.
It also balances the tax obligation and gives you more flexibility to control your tax liability after retirement. The Roth 401k works similarly but you probably already know this. The post is mainly for those who don’t.
#185
I have 4 Roth accounts 2 for me 2 for my wife. It depends on the account and if you have commingled funds. But a Roth allows for the contributions to be withdrawn at anytime. We are also using it for college savings.
#186
Gets Weekends Off
Joined APC: Nov 2011
Posts: 4,535
i get that with a regular roth, just didn't know if the rules were the same for an account funded by rollover from 401a funds
#187
My understanding is once taxes are paid on those funds, as long as they are moved correctly and not commingled, yes. Schwab and Fidelity seem to agree on this but thankfully I haven’t had to withdraw anything yet.
#189
Gets Weekends Off
Joined APC: Feb 2007
Posts: 106
My 401a has had significant gains to date. THOSE are taxable, and must be converted in ratio to the number of post tax dollars. It is not a good deal in my case, and I would guess anyone that has been around awhile it isn't either.
I'll pay the taxes later, at a lower rate.
I'll pay the taxes later, at a lower rate.
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As a part of Delta’s commitment to helping you meet your retirement planning needs, the Delta Savings Plans offer in-plan Roth 401(k) conversions. This feature allows you to arrange for “in- plan” conversions of some of your account balances to Roth accounts within your Delta Savings Plan account.
What is an In-Plan Roth 401(k) Conversion?
This feature allows you to convert certain Delta Savings Plan amounts directly to a Roth account within the Delta Savings Plan. Since the Roth account holds after-tax dollars that grow tax-free if you take a qualified distribution*, this feature can be a good retirement tax planning feature.
What are the tax implications of an In-Plan Roth 401(k) Conversion?
Generally, amounts that are eligible to be converted to a Roth account will be taxable when withdrawn from the Delta Savings Plan. Instead of waiting until those amounts are distributed to you, the taxes are applied when you convert to the Roth Account within the Delta Savings Plan. Fidelity will send you a 1099R that reflects the taxable amount that was converted to your Delta Savings Plan Roth account.
Why would I want to do an In-Plan Roth 401(k) Conversion?
If you anticipate being in a higher federal tax** bracket in retirement or plan to leave your savings to your heirs, you might want to consider a Roth conversion. You may pay lower taxes now with a conversion than if you wait until retirement to begin taking taxable withdrawals. This is an individual decision and an In-Plan Roth 401(k) Conversion is not right for everyone. You might want to discuss it with your tax advisor.
What part of my Delta Savings Plan account can I convert?
The Delta Savings Plan requires the amount that is converted to be vested and “immediately distributable” as an “eligible rollover distribution.” For currently employed participants, a common example of an amount that may be immediately distributable is an amount eligible for in-service withdrawal under the plan’s terms as a result of the plan participant reaching age 59 1⁄2. Other examples include funds in the Delta Savings Plan that you may have rolled over from prior employer plans, or any after-tax contribution you may have made to your account. For former employees with an account balance, the entire account is generally “immediately distributable” as an “eligible rollover distribution.” It should be noted that a conversion to a Roth account within the Savings Plan is irrevocable and the 10% tax penalty that may apply to someone younger than 59 1⁄2 who takes money from the Savings Plan does not apply (subject to recapture – see last question below.)
What else should I consider?
Time. The relative benefits of conversion will increase the longer your money remains in the Roth account. Generally, conversion may not make sense if your time horizon for taking your funds out of the Savings Plan is less than five years, as amounts withdrawn within five years from conversion may be subject to the recapture of any 10% tax penalty not imposed at the time of conversion.
Cost. You will need to weigh the cost of converting against the potential benefits. The tax obligation for converting pre-tax contributions and associated earnings and earnings on after-tax contributions could be substantial. If you are not prepared to pay this obligation in cash or non-retirement savings, you may find these costs outweigh potential benefits.
You are encouraged to contact a financial planning and/or tax professional for specific advice on your personal situation.
To request an In-Plan Roth 401(k) Conversion or to ask for more information, please call Fidelity Investments at 800-603-4015 Monday through Friday (excluding New York Stock Exchange holidays except Good Friday) between 8:30 a.m. and 8:30 p.m. ET to speak with a Service Representative.
Investing involves risk, including risk of loss.
* A distribution from a Roth IRA is tax free and penalty free, provided the five-year aging requirement has been satisfied and one of the following conditions is met: age 591⁄2, disability, qualified first-time home purchase, or death.
**Additional state tax implications may apply.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917 © 2016 FMR LLC. All rights reserved.
#190
Gets Weekends Off
Joined APC: Apr 2008
Position: DAL FO
Posts: 2,169
A lot of people use their Roth as an emergency fund, to allow them to keep more $ invested and minimize cash drag.
First google result on the topic:
https://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/roth_ira/withdrawal_rules
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