MrMiser Financial Health Log

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VinTek
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Joined: Fri May 04, 2007 8:14 pm
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Re: MrMiser Financial Health Log

Postby VinTek » Wed Mar 27, 2013 2:36 pm

ThriftGenuity wrote:You mentioned a penalty, I am not aware of a penalty for a conversion, I thought only for taking money out early?

If you do a Roth IRA conversion, you have to pay taxes on the conversion amount, since you took a deduction putting into the traditional IRA. If you wind up owing too much at tax time, you could be penalized for underwithholding.

There are several ways to deal with this, outlined in this article.

mrmiser
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Joined: Fri Mar 01, 2013 10:11 am
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Re: MrMiser Financial Health Log

Postby mrmiser » Thu Mar 28, 2013 2:29 am

VinTek wrote:If you do a Roth IRA conversion, you have to pay taxes on the conversion amount, since you took a deduction putting into the traditional IRA. If you wind up owing too much at tax time, you could be penalized for underwithholding.

There are several ways to deal with this, outlined in this article.


Thanks. It sounds like we'll fall into the first safe harbor method. We got a small federal tax return this year. That should help us avoid the penalty this year. I understand that'll we'll still have to pay taxes on the conversion as "income". That "income" will fall into the 25% tax bracket. While that may hurt today, I'm sure the day will come when I'm glad we did it.

mrmiser
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Re: MrMiser Financial Health Log

Postby mrmiser » Thu Mar 28, 2013 2:39 am

ThriftGenuity wrote:Reading through this post, you have made excellent progress in such a short amount of time! Have you considered picking up some side jobs to build up your EF and pay off the house expenses? For example, I referee soccer and teach guitar lessons on the side. These types of jobs are nice because they are flexible and considered skilled, so they pay better than your standard retail or restaurant


Thanks! I have ample opportunity for overtime at work. I probably don't take advantage of that as often as I should. I take home about $22/hour after taxes, so it's hard to find side work that pays the same. I just need to change my view of working extra...

ThriftGenuity
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Joined: Wed Mar 27, 2013 12:38 pm
Location: Richmond, VA
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Re: MrMiser Financial Health Log

Postby ThriftGenuity » Thu Mar 28, 2013 5:15 am

That definitely works out well to have OT opportunities. I hear you about changing the mind set about working extra. I always think of it like "ok, this will cover the month's electric bill, or cable" and so on. Good luck in your continued progress!
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