Updated Thursday, November 20, 2014 as of 11:21 PM ET

Ask Ed Slott: Roth IRA Help?

I've been reading Ed's book, The Retirement Savings Time Bomb and I am finding it very helpful.  I would like to follow his basic advice to get as much of my retirement funds as possible into a Roth IRA.I'm confused, though, because it's not always clear to me whether a particular bit of advice is intended for people who are still working, or for those already retired and drawing money. 

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Comments (4)
Taxpayers who separate from service in the year they will become 55, or are already 55, can start taking distribution from their 401-K without being subject to the 10% early distrbution penalty. Therefore, in most cases, you should not rollover a 401-K to an IRA if you are between 54/55 and 59 1/2, unless your 401-K plan does not permit you to take distributions in this way. Also, before doing anything, check with your HR department to determine if there is employer company stock in your 401-K plan, which is often put there by the company as its matching contribution. If there is company stock, and if it has appreciated over the years by 25% or more in value, then get the "cost basis" from HR, and look into the NUA (Net Unrealized Appreciation) provisions of the tax code, because this can save you a significant amount of taxes. (J K Lasser, Your Income Tax, has an excellent discussion of these provisions.)
Posted by DAVID L Z | Sunday, January 20 2013 at 10:32AM ET
Social Security benefits are calculated based upon the highest 35 years of earnings (adjusted by a "PIA" factor). If you worked < 35 years, then the formula uses -0- in the calculation. SS benefits at 62 are 75% of those at 66. Retirement planning often suggests in many cases the advantage of waiting until 70, if you can, because there is an automatic, guaranteed "bonus" of 8%/year, or 32% at 70, by waiting after age 66. This is better than the ROI that can be obtained on most investments, and it is guaranteed. Many advisors suggest this approach, and withdrawing funds from your IRA until you are 70, especially if you are in the 15% income tax bracket. Also, during this period, converting to ROTH IRA if you do not need the money in any year. You can go to www.ssa.gov and use their calculator to project your SS benefits. Most tax advisors and financial planners can also help you with this process.
Posted by DAVID L Z | Sunday, January 20 2013 at 10:40AM ET
SS benefits are not subject to social security taxes. Also, usually social security benefits are taxed on only 85% of the benefits (or even less in lower income situations). The Social Security Administration has many booklets on the myriad of different aspects of Social Security benefit situations, and a fantastic website with a zillion FAQ's (Frequently Asked Questions).
Posted by DAVID L Z | Sunday, January 20 2013 at 10:45AM ET
Great one to read a very good one out here great stats,great images great content Ilove your post keep updating such content for we readers.
Posted by jane g | Wednesday, May 15 2013 at 2:24AM ET
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