GimmeMyMoney
New Member
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Ok I just cashed out an old 401k from my previous job.....I know cashing out isn't the best thing to do but I had to for various reasons.
However, I have $3,000 left from the cash out and I want to invest that money in a ROTH IRA.
Is it smart to invest in a ROTH IRA at this time? And if I do.....will I receive a tax break for this year when I go to file taxes for 2010? The reason why I'm asking if I receive a tax break is because I know the government will automatically tax me 10% of the amount that I withdrew.
Thanks for the advice. This is my first post and I'm very serious about planning for retirement & getting into the stock market so I will look forward to my many conversations with you all.
Thanks again.
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Fri Nov 12, 2010 9:37 pm |
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GimmeMyMoney
New Member
Cash: $ 1.45
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Joined: 12 Nov 2010
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About 4 months ago.
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Sat Nov 13, 2010 4:33 pm |
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oldguy
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quote:
because I know the government will automatically tax me 10% of the amount that I withdrew.
Gimme - too late now, but I think you misunderstood. The 10% is not the tax, it is the penalty for withdrawing the money before age 59 1/2. In addition to the 10% you will owe 15% to 25% more for federal tax and 3% to 6% more for state tax. So you are looking at maybe 40% of the 401k. (That's why everyone says it isn't the best thing to do.)
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Mon Nov 15, 2010 12:15 am |
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GimmeMyMoney
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Cash: $ 1.45
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quote:
Originally posted by coaster
It's always smart to invest in an IRA. If you invest that $3K in a Traditional IRA instead of a Roth IRA, you can claim it as a deduction on your 2010 tax return, thus reducing your taxable income by $3K.
If I go with a Traditional IRA can I roll it over to a ROTH IRA after I've filed my taxes for 2010?
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Tue Nov 16, 2010 8:25 pm |
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oldguy
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Cash: $ 751.85
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quote:
If I go with a Traditional IRA can I roll it over to a ROTH IRA after I've filed my taxes for 2010?
You could - but what would be the point? If you put $3000 into an IRA for 2010, you'll get about a $300 tax break on your 2010 taxes. But then when you roll it over to a Roth you will owe $300 in taxes on the conversion.
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Tue Nov 16, 2010 11:57 pm |
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GimmeMyMoney
New Member
Cash: $ 1.45
Posts: 7
Joined: 12 Nov 2010
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Thanks oldguy, I'll just start with the ROTH.
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Wed Nov 17, 2010 12:06 am |
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