All Forum Posts by: Daniel Murphy

Thanks for this Matthew. The info helps.  I guess my main thought is that the MBD is more complicated and that ultimately you can only withdraw contributions.  

With the taxable account, you can withdraw everything at any point. Subject to tax liability on the gains of course, but it gives you more flexibility.  

I've been a financial planner for 17+ years and one of the main umbrella theories I've learned is that often times, the simpler things are the better they are.  The mega backdoor roth sounds great in practice, but in real life situations I've never actually recommended it to anyone.  The closest I've come to it is doing partial Roth conversions post retirement. 

I liken it to the "cash value life insurance for retirement success" or "invest in crypto to become a quick easy millionaire" ideas.  They sound great in a vacuum, but when you run the numbers in real life scenarios they mostly don't work...

This is a complicated subject, and I'm not 100% sure I'm following all of your points.  But let me say a few things from someone who has processed a lot of partial Roth conversions post retirement.  

1) When & how you contribute to Roth assets is primarily driven on your current tax state.  IE - when you're young and poor (low tax bracket), contribute as much as you can to a Roth.  When you're older and higher income (higher tax bracket) you'll want to contribute to pre-tax savings (generally).  This is to get your tax deduction at a higher tax rate.  
Presumably, if you retire before you take Social Security, you will have a handful of low income years when you could then do Partial Roth conversions and convert those assets you presumably saved at a 22% or higher tax rate, and convert them in a lower income situation (12% or less).  You've essentially "saved" that tax difference.  
To do this, you'll need other sources of income that are tax "preferred". This is where the taxable account comes in.  

2) LONG TERM - If you have kids. And presumably if you're on Bigger Pockets and talking financial stuff, you'll hopefully be in a position to pass wealth onto your kids.  If this is the case, you want as much money as possible in taxable and Roth assets so that you don't pass assets on that create tax burdens for your kids.  

All of this points to what I said earlier, Roth assets are good long term.  

To hit on a few points from your post - You can withdraw contributions from your Roth, and yes you can withdraw gains after 5 years. But you still need to be 59.5 in order to forgo the 10% early withdrawal penalty, even from a Roth.  
Inherited IRA's are still taxable to you, unless they are an inherited Roth IRA.

I'm not a fan of mega back door roth contributions, unless potentially if you're in the 22% tax bracket or lower. But... If you're in a position to contribute the 401k max, plus HSA max, plus even more I would assume you're in the 22% tax bracket or higher.  

I could spew more details, but it would help to know more about your age. Your income. Your goals and what you're trying to accomplish.  

I spent my first 6 years in the financial planning industry working for a firm that had previously sold a lot of privately held REITS that went south. Often in very bad ways.  

Like others have said, you cannot claim the tax losses until the funds are sold and "realized". You'd want to work with the REIT sponsor and your CPA to understand the expected timeline for this a bit more.

On the REIT side - When these investments go underwater, often the sponsor company will freeze or drastically reduce redemptions. This is in an effort to let the investment play out and try to minimize their loss. I would suggest calling them and asking for their redemption process, and take DETAILED NOTES. You'll want to get your name on their distribution list. It's possible that they may only allow 10% of the overall assets to be redeemed at any regular interval. Usually quarterly.
You'll also want to ask them... When you get your name on the distribution list, are you then "in line" for a distribution every quarter, or will you need to call and request a distribution every quarter.  
I'm sorry to say but these can be a major time suck.  Take detailed notes and don't be afraid to ask any and all questions until you feel like you understand the process 100%.  

 Good to know Ryan.  If you're considering Real Estate as an option in the future, I would not add the money to either of these accounts.  With a pre tax employer account, your money will be locked in and mostly unavailable for future use.  
With the Roth IRA, you can only take your contributions out.

I would recommend opening up a brokerage account with Schwab, Fidelity, Vanguard or any other large firm like this.  A "taxable brokerage" account is like your checking or savings, but it's open to nearly all of the investment products.  You could then choose a broad based index fund if you wanted to invest in the market.  

Or... the other nice thing about these accounts is that you could also shop CD rates. But unlike going to your bank (and getting your local banks CD rates), with these accounts you can shop CD rates nationwide.  You are likely to get a better rate on your CD through an account like this also.  

Similar to what others have said... You first need to identity your goal for the money.  IE - your timeframe.  If it's short term, CD's are probably still the best.  Shorter term CD's actually have higher rates than longer term so staying in the 3-6 month range is best.  

If however you don't have any specific goal or timeframe, I generally default to "long term".  Long term money, you could invest into a taxable account so you have access to it whenever you want. Similar to a checking or savings. But by putting it into a broadly diversified index fund like others have mentioned, you'll get the higher "expected" returns of the stock market.  

As for not feeling like it's the right time, I would urge you to focus more on the goals than your feelings.  No offense meant by this... I've been a financial planner for 17+ years and one of the main things I've learned is that the more I think I know what's going on, the less I'm actually correct.  You really have to believe you know more than BILLIONS of investors... 
The stock market is up something like 80% of the days long term. The old saying is "Time IN the market, not TIMING the market."  

I'm happy to chat if you ever want to reach out... 

I'm a financial planner by profession so you'd think the default answer is, "heck yeah, always hire a planner!"  
But in reality, for younger people with moderate income, I actually see less benefit to financial planning.  
The one aspect I'd say where planning can really provide benefit however is with tax planning.  

If you're pretty smart with this stuff, I think can definitely make sense for you two to talk with a tax planner. The intricacies tax planning with a rental are worth hiring a professional, even if you just do it once for an overview.  Given that you're not married, that adds some additional complexity.  
All this is to say, I believe it would be money well spent for sure... 

Does anyone have a pre-built spreadsheet available to run projections for the sale of a house?  Either a personal residential home or an investment property?  Thanks in advance!

Unfortunately, I don't believe such a calculator exists.  There are too many variables to account for with everyone's unique taxes.  

A very simplistic calculation could be, the amount of conversion * 22% would give you your rough taxes. I say this because, (I've been doing partial Roth conversions for years with clients), all of my Roth conversions have been to fill up the 22% tax bracket. I have only had one case where we filled up the 24% bracket and that was a very unique situation.  

I'm not sure what you mean by "one more multiple conversion options".  I either convert when the market is down, or at the end of the year for the most part... 

The investment % of growth of IRA vs Roth is a bit broad. If you use the same investment pre and post-roth conversion, the growth would be the same. However, if you're managing your investments with a bit more tact, you will put your bonds in the IRA and your higher growth investments in the Roth which would give you differing growth rates. But these are "EXPECTED" returns, so they are just estimates.

RMD amounts can be calculated post-conversion, but they are estimates too.  

All of this is nuanced & complicated which is why I don't believe any single calculator exists.  I also don't believe many or any CFP's are charging $5,000 for Roth conversion calculations. 

Hey everyone, I have a client who owns a bed & breakfast property in CA.  They're running into issues with potential refinancing.  Ideally, they would have access to a line of credit, or some type of loan for misc purchases.  But here is what they are running into.  Does anyone have ideas of who to talk? 

1. You can’t get an ag loan because you don’t grow anything. 
2. You can’t get a residential loan because you run a business on the property. Appraisers would do on-line and see the business website. We even had one guy book a room and then cancel.
3. You can’t get a commercial loan because you live in the property

Hey all, I have a home in MN and a home in FL. I'm recently divorced and kept the 2 properties.  My understanding is that I will need to refi in order to get my ex off of the properties.  My question is, both of these homes were purchased under my name only because she had no income. So all closing docs, title etc. only have my signature.  I understand joint legal ownership, but that normally seems to apply at selling.  

Are there any thoughts, options or opinions on how to remove her name from the titles without a refi?