Correct you cannot make an in-kind transfer from a taxable account to a T-IRA (for purposes of Roth conversion). You'd have to liquidate the shares. You'd also need to roll your T-IRA into your workplace plan to avoid the pro-rata rule. It's still likely a good idea as there's not going to be a lot of cap gains tax due on whatever the gain portion of the $7k is (per year).wackerdr wrote: ↑Thu Jun 01, 2023 6:45 pmI think I am understanding what you are saying. Thank you for highlighting it. It’s super helpful.Admiral wrote: ↑Thu Jun 01, 2023 6:37 pmBackdoor Roth has no income limitations. The point is this: taxable monies have tax drag, Roth monies do not. You've already paid income tax on the taxable account funds, so whatever your future tax rate is--higher or lower than today--is irrelevant. I’m not proposing you save directly into Roth instead of in pre-tax (you're above the phaseout anyway, unless you have a Roth option in your workplace plan). I'm proposing you transfer already taxed money. Big difference. You could easily be paying 2% of $300k in taxes each year.wackerdr wrote: ↑Thu Jun 01, 2023 6:28 pmI max out all pre-tax available for me . HSA, Fsa, 401k , are all contributed to allowed limits.Admiral wrote: ↑Thu Jun 01, 2023 6:08 pm OP:
Why do you need (or think you need) $300k in a taxable account? If not for large expenses (read: college) what is this money for? As I noted upthread, I would either spend the money on education (which is a great investment) or get it into Roth ASAP and stop paying taxes on it. Or split the difference. Don't forget you can always pull contributions from Roth if necessary.
You've not adequately explained why taking a loan is preferable to paying for college with money you already have that is not tax-sheltered or reducing your taxable income but rather is adding to your taxable income.
In fact, you probably should max all pre-tax space, do backdoor Roth up to limit each year, and then use the taxable monies for any shortage in living expenses. Controlling cap gains is relatively easy.
I never contributed Roth since it is post tax , and I prioritized comfort of having it on hand if needed. And secondly, I Dont think my post retirement tax rate would be so high as to take advantage of Roth contributed tax-free withdrawals . I think both could be flawed assumptions. Probably I don’t understand it completely.
Does Roth make sense in every scenario ?
When it comes to college funding, the only thing holding me back from selling is capital gains. All are in long term capital gain ( FBGRX and QQQ) , but need to check cost basis to see exact effect.
I am trying to understand if it is better off to take loan at 7 - 8% , and let brokerage grow and Make full 401k contributions, OR , reduce 401k and sell brokerage as needed. But as other have pointed out, I should be able to fund significant portion from cash flow.
But to convert brokerage to IRA, I need to sell what I have in brokerage. Correct? That’s what I am reading, and it will have capital gains, . If this understanding is accurate , would it now offset any advantages of tax free withdrawals?
I suppose it all depends, as I said upthread, on the purpose of the taxable savings in the first place. I personally would never take a 7% loan just to save a little tax on selling stock. Taxable investing by definition always incurs some tax (unless you happen to be below the tax threshold, which you aren't.)