RHA VEBA Vacation email
12-14-2017, 05:46 AM
#31
Gets Weekends Off
Joined APC: Feb 2011
Posts: 3,866
This?
https://www.onwallstreet.com/news/new-tax-bill-no-more-roth-ira-do-overs
New tax bill: No more Roth IRA do-overs
As it’s being hashed out, the new tax bill contains an unexpected and not widely publicized provision: The repeal of the Roth conversion do-over, also known as a Roth recharacterization.
This marks the end of the so-called Roth conversion cycle where funds could be converted to a Roth IRA, and then all or any part of that conversion could be undone or recharacterized.
https://www.onwallstreet.com/news/new-tax-bill-no-more-roth-ira-do-overs
New tax bill: No more Roth IRA do-overs
As it’s being hashed out, the new tax bill contains an unexpected and not widely publicized provision: The repeal of the Roth conversion do-over, also known as a Roth recharacterization.
This marks the end of the so-called Roth conversion cycle where funds could be converted to a Roth IRA, and then all or any part of that conversion could be undone or recharacterized.
12-14-2017, 06:59 AM
#32
Banned
Thread Starter
Joined APC: May 2014
Position: Tom’s Whipping boy.
Posts: 1,182
I do exactly as Mako stated. I have 10 exemptions going into the new year and have 100% pretax going to my 401k. Once the pretax bucket's maxed out, I have 100% post-tax going to my 401k.
After maxing out my post-tax 401k, I change my exemptions down to 0 plus have $1k/paycheck go to taxes until I'm caught up for the year.
As far as 'peanuts,' I have put just over $23K in excess contributions into my VEBA so far this year with no vacation sellback. (787 FO on year 12 pay).
The reality of retirement medical costs is that they are large and getting bigger. We (wife, I) have Tricare and we will have to pay medicare Part B when we retire (Medicare Part B is required for Tricare at 65). Based on 2017 Part B rates, I'll have to pay $428.60/mo for at least two years (I plan on converting all taxable 401k money to Roth after I retire which will extend that cost for a few more years) and will eventually drop down to $187.50/mo x 2 (wife, me) when my wife retires. https://www.medicare.gov/your-medica...t-b-costs.html
If you or your spouse ends up in a nursing home, your VEBA will evaporate very quickly.
After maxing out my post-tax 401k, I change my exemptions down to 0 plus have $1k/paycheck go to taxes until I'm caught up for the year.
As far as 'peanuts,' I have put just over $23K in excess contributions into my VEBA so far this year with no vacation sellback. (787 FO on year 12 pay).
The reality of retirement medical costs is that they are large and getting bigger. We (wife, I) have Tricare and we will have to pay medicare Part B when we retire (Medicare Part B is required for Tricare at 65). Based on 2017 Part B rates, I'll have to pay $428.60/mo for at least two years (I plan on converting all taxable 401k money to Roth after I retire which will extend that cost for a few more years) and will eventually drop down to $187.50/mo x 2 (wife, me) when my wife retires. https://www.medicare.gov/your-medica...t-b-costs.html
If you or your spouse ends up in a nursing home, your VEBA will evaporate very quickly.
2 questions; how does the a”post tax” contribution affect the IRS limit for spillage.
When was the max allowable 401(k) contribution percentage raised from 19%..
12-14-2017, 01:07 PM
#33
Gets Weekends Off
Joined APC: Mar 2005
Posts: 398
Though not “exactly” as mako described, it is actually a pretty good plan, if the pilot can cash flow it. The average guy can’t.
2 questions; how does the a”post tax” contribution affect the IRS limit for spillage.
When was the max allowable 401(k) contribution percentage raised from 19%..
2 questions; how does the a”post tax” contribution affect the IRS limit for spillage.
When was the max allowable 401(k) contribution percentage raised from 19%..
2) I didn't realize there used to be a max percentage you could contribute. I set 30% until I max my 401(k). Andy's example he sets it at 100%.
12-14-2017, 01:52 PM
#34
UCH Pilot
Joined APC: Oct 2014
Position: 787
Posts: 776
1) Once you reach 415(c) limits (for 2018 $55,000 if under 50, $61,000 if over 50) your 16% will spill over. That $55,000 is a mix of your and company contributions. Post tax contributions will allow you to reach that $55,000 limit quicker allowing more spill over of the company 16%.
2) I didn't realize there used to be a max percentage you could contribute. I set 30% until I max my 401(k). Andy's example he sets it at 100%.
2) I didn't realize there used to be a max percentage you could contribute. I set 30% until I max my 401(k). Andy's example he sets it at 100%.
12-14-2017, 02:37 PM
#35
Gets Weekends Off
Joined APC: Mar 2005
Posts: 398
This?
https://www.onwallstreet.com/news/ne...h-ira-do-overs
New tax bill: No more Roth IRA do-overs
As it’s being hashed out, the new tax bill contains an unexpected and not widely publicized provision: The repeal of the Roth conversion do-over, also known as a Roth recharacterization.
This marks the end of the so-called Roth conversion cycle where funds could be converted to a Roth IRA, and then all or any part of that conversion could be undone or recharacterized.
https://www.onwallstreet.com/news/ne...h-ira-do-overs
New tax bill: No more Roth IRA do-overs
As it’s being hashed out, the new tax bill contains an unexpected and not widely publicized provision: The repeal of the Roth conversion do-over, also known as a Roth recharacterization.
This marks the end of the so-called Roth conversion cycle where funds could be converted to a Roth IRA, and then all or any part of that conversion could be undone or recharacterized.
As for the link above, that looks like it's for IRAs and not 401(k)s. Regardless, make hay while the sun shines.
12-14-2017, 03:49 PM
#36
UCH Pilot
Joined APC: Oct 2014
Position: 787
Posts: 776
How does recharacterizing it do anything? Its still post-tax, so it can be withdrawn free, right?
12-14-2017, 04:19 PM
#37
Gets Weekends Off
Joined APC: Mar 2005
Posts: 398
When money leaves a 401(k), unless it's Roth or a recharacterized post-tax contribution, its taxed as ordinary income.
By recharacterizing it to Roth you'll be able to withdraw the gains on that money tax free. It's the same as making a Roth 401(k) contribution.
As an aside, if you put $10,000 pre-tax in your 401k and 20 years later you have $5,000, the withdrawals will still be taxed as ordinary income even though you have a "loss". So think of a 401(k) withdrawal as a tax-filter. It catches taxes on the way out. There are two ways to avoid that filter: Roth contribution or After-tax Roth recharacterization.
I'm not a tax professional but that is my understanding of the system as it exists now.
12-16-2017, 02:19 PM
#38
Gets Weekends Off
Joined APC: Mar 2006
Position: guppy CA
Posts: 5,171
This?
https://www.onwallstreet.com/news/ne...h-ira-do-overs
New tax bill: No more Roth IRA do-overs
As it’s being hashed out, the new tax bill contains an unexpected and not widely publicized provision: The repeal of the Roth conversion do-over, also known as a Roth recharacterization.
This marks the end of the so-called Roth conversion cycle where funds could be converted to a Roth IRA, and then all or any part of that conversion could be undone or recharacterized.
https://www.onwallstreet.com/news/ne...h-ira-do-overs
New tax bill: No more Roth IRA do-overs
As it’s being hashed out, the new tax bill contains an unexpected and not widely publicized provision: The repeal of the Roth conversion do-over, also known as a Roth recharacterization.
This marks the end of the so-called Roth conversion cycle where funds could be converted to a Roth IRA, and then all or any part of that conversion could be undone or recharacterized.
Roth conversion: Converting Traditional IRA/401k money to a Roth IRA/401k.
Recharacterization: Changing one's mind after a Roth conversion and undoing it.
Though not “exactly” as mako described, it is actually a pretty good plan, if the pilot can cash flow it. The average guy can’t.
2 questions; how does the a”post tax” contribution affect the IRS limit for spillage.
When was the max allowable 401(k) contribution percentage raised from 19%..
2 questions; how does the a”post tax” contribution affect the IRS limit for spillage.
When was the max allowable 401(k) contribution percentage raised from 19%..
Max allowable 401K's been 100% for a long time for United. Employers can choose a lower percentage - I don't know the tax logic for limiting the percentage but some companies don't allow 100% for tax reasons. My wife's 401k has neither a Roth nor a >$18K/24K option.
Just got off the phone with Schwab. We are able to do an inservice Roth recharacterization. They are emailing me the form and the rep said it takes about 10 days for post tax to be recharacterized.
As for the link above, that looks like it's for IRAs and not 401(k)s. Regardless, make hay while the sun shines.
As for the link above, that looks like it's for IRAs and not 401(k)s. Regardless, make hay while the sun shines.
12-16-2017, 03:28 PM
#39
Gets Weekends Off
Joined APC: Mar 2005
Posts: 398
https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-recharacterization-of-roth-rollovers-and-conversions
Last edited by jumppilot; 12-16-2017 at 03:41 PM.
12-16-2017, 11:58 PM
#40
Gets Weekends Off
Joined APC: Mar 2006
Position: guppy CA
Posts: 5,171
Thanks for the correction. My first time doing it was this year and my verbiage was wrong.
https://www.irs.gov/retirement-plans...nd-conversions
https://www.irs.gov/retirement-plans...nd-conversions
Just to add to the discussion, I consider Roth accounts to be a very valuable tool for estate planning. My wife and I will have income in retirement in excess of what we'll spend so our entire Roths will end up being inherited. This is where I really like a Roth because the beneficiary of a Roth can take RMDs (required minimum distributions) over their lifetime based on IRS actuarial tables. This means that the last portion of your Roth can grow tax free for 50 (or more) years after your death, making it a powerful estate planning tool.
If you're planning on leave a decent sized estate, I highly recommend setting up a trust; I really like the dynasty trust (established in either SD or NV - you don't need to be a resident of either state). The trust allows you to avoid any estate taxes and also allows you to specify how the funds will be used/distributed and has a number of protections against being wiped out by lawsuits against your heirs. You can specify distribution of the funds to make sure that your heirs don't urinate it all away. A further feature of the dynasty trust is that if established in NV, it has a duration up to 365 years; in SD, it can run in perpetuity.
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