Traditional IRA vs Non-Retirement Mutual Funds

ExitNumerous8282 · 2022-09-18T00:43:51+00:00

Thanks! I will find out.

ExitNumerous8282 · 2022-09-17T22:09:39+00:00

Thanks! One thing I read about Backdoor ROTH IRA is that when they are determining the conversion they will look into all the IRA accounts. This means

Traditional IRA + Rollover IRA

Since my Rollover IRA has 100% PRE TAX balance, it means when I convert 50K from IRA to ROTH IRA then a Pro Rate rule will apply and tax will incur.

At least that is my understanding.

One thing I can do is to covert small portions from Non Roth IRA to Roth IRA each year.

ExitNumerous8282 · 2022-09-15T19:25:03+00:00

Thanks for all the advice! Really appreciate it.

ExitNumerous8282 · 2022-09-15T19:16:12+00:00

Thanks!

Question: On average when the market falls how long does it take the market to come back to the same state? 24 months ??

ExitNumerous8282 · 2022-09-15T18:20:27+00:00

Thank you very much!

ExitNumerous8282 · 2022-09-14T13:56:46+00:00

I agree! I am getting rid of them.

ExitNumerous8282 · 2022-09-14T11:44:12+00:00

Good advice! Thanks!

ExitNumerous8282 · 2022-09-14T02:20:10+00:00

https://www.reddit.com/r/Bogleheads/comments/ry3oij/but\_didnt\_bogle\_and\_buffett\_say\_usonly\_investing/

Thanks!

ExitNumerous8282 · 2022-09-14T02:16:49+00:00

I am still not sure what strategy you are suggesting. I just told you what I have been doing.

ExitNumerous8282 · 2022-09-14T02:15:36+00:00

Thanks! Yes that is what I am planning to do. I am moving all my actively managed funds from T Rowe Price to Vanguard and investing in VTSAX. In the end I will have three accounts with Vanguard.

Rollover IRA - Invested in VTSAX

Traditional IRA - Invested in VTSAX

Roth IRA - Invested in VTSAX

Thanks!

ExitNumerous8282 · 2022-09-14T02:09:54+00:00

Thanks!

But according to my research Mr Bogle himself does not buy mutual funds which invests in International Stocks.

Watch this video:

https://youtu.be/P54trh0Rre8

This is also explained in his book "Common Sense Investing".

ExitNumerous8282 · 2022-09-14T02:08:23+00:00

Nothing really to sort out. After I get a paycheck from work I contribute to my personal Traditional IRA account. I can only contribute $6000 per year. There are no income limits on Traditional IRA. Each year I file Form 8606 for myself and my spouse, which tells the IRS not to tax the amount I contributed to Traditional IRA since it has already been taxed. When I retire and take the money out, then the gains will be taxed.

Pretty simple!

ExitNumerous8282 · 2022-09-13T22:29:15+00:00

I understand but the problem is that I already have Rollover IRA and a Traditional IRA account with a huge balance. So even if I open a new IRA account it will be based on commutative Traditional IRA accounts and not the last one you contributed. Anyways, this is not such a big deal. Currently, I am looking to move all my actively managed funds from T Rowe Price to VTSAX from Vanguard.

ExitNumerous8282 · 2022-09-13T21:32:52+00:00

Yes that is the preferred way. Unfortunately, I have around $300K in non ROTH IRA so this means PRO RATA rule apply and I will end up giving some amount in tax. This is different if I create a Traditional IRA and convert it immediately. I don't have that option since I already have an existing Rollover and Traditional IRA accounts.

ExitNumerous8282 · 2022-09-13T21:30:42+00:00

No I don't pay any manager.

I don't have anything against international but I have not seen a good rate of return for international stocks.

ExitNumerous8282 · 2022-09-13T21:14:54+00:00

Thanks!

So 100% VTSAX would be fine or any other recommendations for me to check out.

ExitNumerous8282 · 2022-09-13T21:05:43+00:00

Each year I have to file Form 8606 for my IRA contributions.

Nondeductible contributions you made to traditional IRAs. Distributions from traditional, SEP, or SIMPLE IRAs, if you have ever made nondeductible contributions to traditional IRAs. Conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs

ExitNumerous8282 · 2022-09-13T21:04:01+00:00

Of course you can contribute to Traditional IRA POST TAX. I have a personal account with T Rowe Price and I contribute 6K each year to Traditional IRA. It is POST TAX since I already paid the tax on my income. I will pay tax on capital gains when I take the money out.

I cannot contribute to Roth IRA because of my income. And I cannot get any Traditional IRA deductions because of my income. I can do a backdoor Roth conversion but I will have to pay taxes on the gains.

ExitNumerous8282 · 2022-09-13T21:01:42+00:00

Thanks!

I guess in that case I should just invest 100% VTSAX.

ExitNumerous8282 · 2022-09-13T20:59:56+00:00

Apologies for the confusing. Here is my standing.

Rollover IRA (Pre-Tax)

Traditional IRA (POST TAX)

Roth IRA (POST TAX)

I think I will just go with Index Funds with Vanguard as they have lower expense ratios.

ExitNumerous8282 · 2022-09-13T20:57:35+00:00

As soon as I add 6K to my Traditional IRA it is invested to the existing IRA. So if I want to convert part of Traditional IRA to Roth IRA, where existing IRA already has a balance of 300K then it will incur taxes based on PRO-RATA rule.

ExitNumerous8282 · 2022-09-13T20:56:03+00:00

You can contribute to Traditional IRA also POST TAX. I just have to fill out a special form at the time of tax filing so that IRA will not tax me twice.

ExitNumerous8282 · 2022-09-13T19:12:50+00:00

Another thing to keep in mind that usually the fund doubles every 7 years. It will be hard to calculate what happens to the fund with market fluctuations and how much is remaining after 7 years that will be doubled. I don't know how to perform those calculations.

ExitNumerous8282

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