random bits

[cellio]

My mother-in-law's seder has some singing, but mostly in Yiddish. This year (finally) I seem to have earned enough points with the family; I asked if we could add some Hebrew songs, offering to do the work (compiling and copying), and she said (via Dani) to bring a few. Yay. I'm going to make one double-sided sheet (including sheet music for some), on the theory that there's no sense wasting paper and this way there's a choice. Tiny steps... (At this seder I enjoy spending time with the people and I dislike the haggadah. At my father-in-law's seder, the haggadah is fine but the people aren't interested in doing most of it.)

At work we're about to get some expansion space, and they just published the new seating chart. People were given the option to stay put or take their chances. One of our neighborhoods (oh, did I mention that we have designated neighborhoods? that turns out to be fun, actually) is unpopular due to the way the space is set up. Every person there save one moved out. No one moved in. So the seating chart shows Beth amidst a sea of numbered spaces. There was some talk today of renaming the neighborhood; an early proposal was something like "Beth's Fiefdom" but I suspect that the latest will stick: "Bethlehem". If it weren't so close to Pesach I'd bring her a loaf of bread. :-) ("Bethlehem" is an anglicization of "Beit Lechem", which is literally "house of bread".)

San Francisco is about to ban plastic bags from grocery stores, saying that this will cut down on 1400 tons annually sent to landfills. I wonder how they came up with that figure. Do they catalog the landfills? Are they simply assuming that all bags produced go to landfills and wouldn't otherwise? Have they considered that some of those bags are recycled and, when not available freely, will just be replaced by other plastic bags in landfills? For example, I use them when scooping out the litter box, dog owners use them for a similar purpose on walks, and I know people who use them in bathroom trash cans instead of buying small bags for that purpose. I am not (in this entry) arguing against the policy; I'm merely questioning their data analysis. How do they know how much, if any, reduction there will be in landfills?

This article on Roth IRAs (link from patrissimo) seems to suggest that a simple money-laundering exercise lets one bypass the restrictions on using Roth IRAs. How odd. If that's true, it would be a way for people in higher income brackets to hedge their bets, which seems counter to the intent of the Roth. (Traditional IRAs are tax-free on the way in and subject to income tax on the way out, which makes sense if you think you'll be in a lower tax bracket when you retire. If you don't trust that tax rates won't go up, though, a Roth IRA is insurance -- you pay the income tax on the way in and nothing when it comes out.)

Comments

[geekosaur]

But it might be mistaken for showbread! :)

[cellio]

Only if it doesn't get stale and moldy. :-)

[kayre]

I can't help picturing a "gingerbread" house made of matzoh. :)

[cellio]

Ooh. Tempting! I probably won't do that, but maybe, just maybe, I'll fabricate something out of matzah boards (so not a cake) with something like chocolate or honey to hold it together. :-)

[nsingman.livejournal.com]

That is indeed how Roth IRAs work, and the 2010 loophole does allow for a regular IRA (which has no income limits) to be converted to a Roth (which does, and they're not all that high) in that year alone. Additionally, higher earners have the option (if their company offers it) of opening a Roth 401(k), which allows for larger contributions ($15K/year, instead of the IRA limit of $4K) of after-tax dollars, and has no income limits.

My employer doesn't offer the Roth 401(k) option yet, but I'm looking forward to it, and will probably split my contributions between the regular 401(k) and the Roth.

You're right, though, in noting that what you're doing in deciding among these choices is attempting to make a market call on future tax rates, and also perhaps doing some tax hedging.

[cellio]

I've been a good little saver and, until last year, have maxed out my IRA and (later) 401(k) every year since age 20. If a Roth 401(k) ever becomes available to me, I will make all my contributions there in an attempt to start counter-balancing.

("Until last year": I decided that I was putting too much of my long-term savings in places I can't control, so I'm putting a little more in conventional mutual funds and a little less in the pot I can't get to until I'm 59.5.)

("Can't get to": yeah, ok, if you want to pay exhorbitant penalties.)

I'm no financial expert, but it seems to me that, given the current rules, at the beginning of your career (when your tax rate is lower) you should load up on Roths and later, as your tax rate rises, you should switch to conventional plans. When you and I were getting started on this stuff, of course, IRAs had just barely been invented at all. :-)

[530nm330hz.livejournal.com]

It's not just a question of tax rates, it's a question of compounding. You're going to be avoiding tax on decades of compounded return.

Pay into a Roth until the phaseouts make you stop, then pay into a non-deductable traditional. And keep your records carefully because when you eventually convert or withdraw the tax is prorated based on what portion of your contributions were originally deductable -- and whose gains are therefore taxable on withdrawal -- vs. what portion were originally taxed -- and whose gains are not taxed on withdrawal, or are at least taxed differently. There's an extra schedule that you submit each year with your tax returns to keep this straight, whose number escapes me at the moment.

[cellio]

Compounding: good point! Yes, that makes quite a difference.

when you eventually convert or withdraw the tax is prorated based on what portion of your contributions were originally deductable

Ah -- that's important. It basically means that when you convert an IRA to Roth you pretty much need to do all of it, right? (I wonder how that works with joint returns; am I factoring in my IRA money or mine and his? A question for a professional, methinks.)

Another important implication: when you leave a job and your employer encourages (or requires) you to roll your 401(k) money over into an IRA, that has consequences. Ouch!

[magid.livejournal.com]

when you convert an IRA to Roth you pretty much need to do all of it, right?
You can spread it out over a couple of years if you time it right (in 2011 and 2012, according to the cited article, or over more years), to lessen the tax hit.

[magid.livejournal.com]

Another way of looking at traditional v. Roth IRAs:
With a traditional IRA, you pay tax on the whole thing, albeit at a lower rate (probably). With a Roth IRA, you pay tax only on your initial contributions, though at a higher rate (likely). Given the glories of compounding, it's still probable that one would pay less total tax using a Roth as long as one starts enough before retirement. (Another factor: less paperwork in figuring out which bits you're taking out are taxable.)

[murphstein.livejournal.com]

Not just for rich folks!

Once I got a "real" career, I always saved half of every paycheck, which includes dumping the max into my 401k. I've never made the big bucks, but a few years ago, my financial advisor (ie, Dad) told me to move everything from my most recent 401k and roll-over IRAs into Roth accounts. The tax up-front was obnoxious but not prohibitive.

However, the only financial advice I'm qualified to give is "Trust Vanguard."