All Forum Posts by: Daniel Murphy

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?  

Hey Michael, a few quick questions. When did he inherit the IRA and was it from a spouse or non spouse?
If it's from a spouse, it just becomes his and follows normal IRA distributions rules.  If it's from a non spouse, he will have to withdraw the entire account within 10 years. In 16+ years, I have never heard of an exception to this.  In fact, the IRS levies the largest penalty that I'm aware of (50% of whatever the required distribution was supposed to be) on IRA required distributions. 

Full transparency, I've also never heard of this penalty being enforced... 

His withdrawals will be taxable, but they should not affect his benefits. 

Help me understand Rental Agreements, outside of Airbnb.

According to the Airbnb TOS, when a guest books with us, they are entering into an agreement directly with us as the host (the Airbnb TOS).

Does getting a secondary rental agreement through a management software really add any extra security or liability release? 

I understand the benefit of having guests' contact info for myself, but in 2 years we have not had much success yet with recurring guests coming back to book directly.

As a financial planner, I would say that one of the main things I'm trying to do for my clients long term is to get money as efficiently into Roth IRA's as possible. The real benefits of a Roth, you won't see for 30+ years. Roth assets are withdrawn tax free, which gives you incredible options in retirement. Plus, they pass to heirs tax free.

Imagine yourself as a 70+ year old. You've built up a decent RE portfolio. You're retired & you don't need your investments to survive (which are now likely worth well over $1M).  You start to run into troubles when you're required to take distributions from your Traditional IRA's & 401k's.  Essentially, you've lost some control over your taxes now because of these required distributions.  This is one scenario when Roth assets are incredibly helpful.  You can control your tax bracket more because you have the option to withdraw tax free assets when needed. 

To your current situation. Your total income of $176k minus the standard deduction of $27,700 gives you an estimated taxable income of ~$148k.  This puts you in the 22% tax bracket which caps out around $178k.  So until your income grows by another $30k, investing in the Roth is still a good strategy. Once your income grows more than this, you'll likely want to shift your savings to the standard 401k. 

You'll also want to determine what your goals are. If you want to buy more RE soon, I would shift your savings to a taxable brokerage. Continue to put the min amount into your 401k to get the employer match, but you could put the rest into a taxable brokerage account which will be 100% available to purchase more RE.  

Long winded answer, but ultimately you want to save where you get the most tax benefit, and the most "how am I going to use this money" benefit.  Reach out to me if you want to talk about it more.  

 A few thoughts on this... 

First, your return comparison is likely not an apples to apples comparison.  Usually, you're comparing your 401k portfolio returns (which are usually in a default target date fund) vs SPY.  It's like comparing a wide, stable & safe pontoon, to a speedboat.  As long as the expenses in the 401k are not abnormally high, investment returns should be similar if you're comparing like investments.  

You mentioned you make too much to contribute to a Roth. One benefit you may want to take advantage of with the 401k is the tax deduction.  Look at your previous years tax return, then go to your taxable income line.  Google "IRS tax rates" for your filing status.  If you're at or near an increasing tax bracket, it could make sense to contribute to the 401k just enough to get your taxable income one tax bracket lower.  (in fairness, this is not super common).  

All that being said, I normally recommend people invest 1st in their 401k to get the employer match. Then to a Roth IRA (neither of these are applicable to you). Next step is to look back at the 401k (for the tax deduction) or a taxable investment account. The taxable investment account will not give you a tax deduction, but you're right. It will be tax-advantaged to you & fully accessible to use for future real estate purchases.

This is a nuanced situation, but you're on the right track with your thinking.  Reach out if you have any other questions... I nerd out on this stuff. 

Most any of the big custodians will be able to set this up for you easily and with little to no cost.  Fidelity, Vanguard, Schwab etc.  It just depends on which interface you are most comfortable with.  I have 4 UGMA's setup at Schwab.  Very easy process.  

Hey @Shawn Fletcher, I honestly don't know a ton about the rule of 55, but I hate seeing your question go unanswered for so many days.  Schwab has a good article on this.  Here's a few things to note from the article:

- You can only take the penalty free withdrawals from a 401k where you were actively contributing. 

- You need to leave the plan in place until you're 59.5. IE- you can't move your 401k plan into an IRA & continue to take withdrawals. You'll want to check your admin fees for keeping the plan alive to see if it's advantageous to leave the plan in place.

All in all, this seems pretty straight forward. BUT, I've been a financial planner for 15  years & have not yet run across this (other than state employees having early withdrawal benefits) & the 72t provisions.  

You'll want to call your recordkeeper (401k sponsor) and ask them directly. If this is not a common thing, they may not know about it and automatically code any distributions pre 59.5 as "early distributions" which will trigger the penalty on your taxes.  

Call to double check. If you get a service rep that doesn't know about it, ask for someone else until you feel confident in their answer.  Financial service reps are hit or miss...