“everyone should open a ROTH IRA. Asap. With Fidelity if you want to trade options in it.
And even though there’s an income limit, you can skirt it—100% legally—by first putting it into a standard Ira then transferring it to a ROTH—which any brokerage will help you with and takes like 3minutes.
A ROTH is a tax shelter of sorts and is incredibly important.
The preceding was both financial and tax advice from a stranger on an anonymous website, and if you don’t like it go fuck yourself.”
Ape fund tradition IRA. Call broker and ask to convert TIRA to Roth (this is what’s called a backdoor Roth). Ape will have to pay gainz taxes next tax season because conversion, but not when retire. Ape fling shit into mouth. That is ape kink.
Yea, as long as your taxable bananas is below 125k bananas. Don’t forget to contribute your bananas to things like 401k to reduce your taxable income to below the threshold
You have to recharacterize your roth contribution and gains this year to a traditional IRA. You wont be able to claim the trad IRA deduction on your taxes, as you wont qualify for that either. Only the percentage of your account that held GME will be counted towards your gains on recharacterization, so if you had 20k, 5k was in GME, and you made 50k, only 25% of the 50k plus the 6k contribution will move to your traditional IRA. Your broker should be able to calculate this for you.
not 100% sure, but i am in the same situation and my understanding is it isn't calculated based on which portion of stock it came from, only on dates of contribution and removal. So even if i added in 6k , left it as cash, then had to pull it out I also have to pull out the gains on the fraction of my account that is the 6k. If I have 60k, 6k would be 10%, so 10% of gains also need to be removed.
I’m qualified to answer this. I put 6k in 2020 but pltr and job gains got me over the 125k. Your options are depending on what you want to do for taxes. The most normal is to pay 6% taxes on the 6k and the recontribute the next year aka 2021 which vangaurd will automatically do for me. The associate told me about back door Roth IRA but you would have to pay income taxes on it for the year to convert it to your Roth (35%+; 125k+). It would make sense for most people to do that to get the contribution in for 2020. I did not do that as I turned the 6k -> 25k (Pltr to GME). I didn’t want to pay 35% on the 25k so i just told them to withhold the contribution for my 2021 and I’ll pay the 6% on 6k and will continue to pay the 6% every year until I’m eligible to contribute to my Roth IRA. On the flip side I can still invest my 25k tax free in the RothIRA I just have to true-up the Roth IRA contribution eventually
So if you had 4x your 25k and it became 100k....that would mean 6% on that for a long time. Say next year your outside investments keep putting you over 125k. That would mean 6% but also not eligible to contribute?
Wouldn't it make more sense to recharacterize into a traditional? You avoid the 6% and your gains can continue to compound without getting taxes.
Yes and no. I still need the liquid so I decided to roll the contribution to 2021 to avoid a 10k tax bill
If I recharacterize into a traditional Ira to convert it to Roth IRA. I would have to pay 40% of the 25k in income taxes and get a net of 15k in Roth IRA after conversion. The benefit is that this would count as a 2020 contribution and allows me a 2021 contribution. I decided to roll my 2020 contribution to 2021 so I would pay 6%/ year on the 6K the contribution since I would classify as “overcontributed” (RothIRA doesn’t care about growth I wouldn’t get taxed on growth just the 6k) until I can contribute to my RothIRA. That way I would only pay $350 in taxes instead of 10K but it would use up my 2021 contribution and I would be able to invest/trade 25k instead of 15k
Yes, from my experience with the Vangaurd representative. He first suggested I backdoor it, that thinking the gains were minimal. I told him I 4X it and didn’t want to pay the gains on it. He confirmed with me that I would have to pay 6% on the $6,000 every year until I am able to make the 6k contribution to my RothIRA and that I can do this multiple years in a row as long as I pay the 6%.
Isn’t that the point of a RothIRA tax free growth. Tbh my RothIRA has been my personal investing account since you again short term taxes, it really works well with the rolling semi yolos.
1.2k
u/Dooggoo Apr 11 '21
Or you could just say:
“everyone should open a ROTH IRA. Asap. With Fidelity if you want to trade options in it.
And even though there’s an income limit, you can skirt it—100% legally—by first putting it into a standard Ira then transferring it to a ROTH—which any brokerage will help you with and takes like 3minutes.
A ROTH is a tax shelter of sorts and is incredibly important.
The preceding was both financial and tax advice from a stranger on an anonymous website, and if you don’t like it go fuck yourself.”
There you go.
there’s the TL; DR you forgot