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Post by The Walk of the Penguin Mich on Sept 17, 2020 14:38:32 GMT -5
a Roth IRA for someone and not tell them about it?
My brother is incredibly behind the 8 ball with regards to retirement savings (like he has squat) and I'd like to help him out. However, I think that he should not know that the money is available until he reaches retirement age. I am 100% sure he is not already contributing to a Roth already.
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jerseygirl
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Post by jerseygirl on Sept 17, 2020 14:43:17 GMT -5
You would need his SS number and might mess up your tax return also
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Post by The Walk of the Penguin Mich on Sept 17, 2020 14:47:21 GMT -5
You would need his SS number and might mess up your tax return also How would it mess up my tax returns? The contribution is not going to be associated with MY SS#. I'm not eligible to contribute to any Roths in my name due to income limitations. But what's to stop me from opening one up for him? I could potentially give him the money and let him do it, but TBH I think he'd spend it. I have his SS#.
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mollyanna58
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Post by mollyanna58 on Sept 17, 2020 14:48:58 GMT -5
I think the IRA custodian has to send out a form every year (5498?), so he would find out, unless you use your address.
I am also guessing the custodian would require some sort of ID.
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jerseygirl
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Post by jerseygirl on Sept 17, 2020 14:51:12 GMT -5
Maybe because it’s coming from your funds?? Very thoughtful to help your brother
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justme
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Post by justme on Sept 17, 2020 14:56:14 GMT -5
So I opened an IRA with Fidelity recently (my 401k is there so I was lazy since I had to type less than if I opened it at vanguard lol). And I don't recall anything besides the SS# and the usual name/dob/address. It was all done online. Since I already had an account maybe they didn't need other info from me?
You putting money in it shouldn't be a problem, it's under the gift tax limit for you. So other problems....his income disqualifying him from contributing or if it was low enough he'd miss the saver's credit. I'm trying to recall if I had to put anything on my taxes for the Roth this year. I don't think so? I started a Roth savings account years and years ago and besides the statements they send to me that's it.
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Post by The Walk of the Penguin Mich on Sept 17, 2020 14:57:29 GMT -5
I think the IRA custodian has to send out a form every year (5498?), so he would find out, unless you use your address. I am also guessing the custodian would require some sort of ID. Hmmm, about the form. Yeah, I remember receiving that paper in the mail. Damn! I wonder if I should just call Fidelity and ask them there. I can't be the only person in this situation.
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Post by The Walk of the Penguin Mich on Sept 17, 2020 15:01:33 GMT -5
So I opened an IRA with Fidelity recently (my 401k is there so I was lazy since I had to type less than if I opened it at vanguard lol). And I don't recall anything besides the SS# and the usual name/dob/address. It was all done online. Since I already had an account maybe they didn't need other info from me? You putting money in it shouldn't be a problem, it's under the gift tax limit for you. So other problems....his income disqualifying him from contributing or if it was low enough he'd miss the saver's credit. I'm trying to recall if I had to put anything on my taxes for the Roth this year. I don't think so? I started a Roth savings account years and years ago and besides the statements they send to me that's it. His income isn't going to be a problem, but mine is. If I felt like I could tell him, he could probably benefit from the gift on his taxes. I thought about this too. Actually, he'd probably benefit best from a traditional IRA, but I'd have to tell him so he could deduct it. His income in retirement is going to be low.
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Deleted
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Post by Deleted on Sept 17, 2020 15:37:23 GMT -5
I don't know if it is just a quirk of TurboTax, who might be tracking my Roth contributions for future withdrawals, or if it shows up somewhere on the form, but I have to input the amount I contributed to my Roth each year when doing my taxes with TT. Someone else mentioned the form you get every year from the firm holding your Roth. They also send a copy of that to the IRS.
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Deleted
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Post by Deleted on Sept 17, 2020 15:41:56 GMT -5
I don't know if it is just a quirk of TurboTax, who might be tracking my Roth contributions for future withdrawals, or if it shows up somewhere on the form, but I have to input the amount I contributed to my Roth each year when doing my taxes with TT. Someone else mentioned the form you get every year from the firm holding your Roth. They also send a copy of that to the IRS. Turbo Tax just does that to help you track your basis. You're not required to report anything on your 1040 for Roth contributions.
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Deleted
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Post by Deleted on Sept 17, 2020 15:49:25 GMT -5
You would need his SS number and might mess up your tax return also How would it mess up my tax returns? The contribution is not going to be associated with MY SS#. I'm not eligible to contribute to any Roths in my name due to income limitations. But what's to stop me from opening one up for him? I could potentially give him the money and let him do it, but TBH I think he'd spend it. I have his SS#. Nothing really. As long as you have his SS#, are sure he's not contributing to an IRA as well and use your address. I've opened accounts for others without them knowing (granted they were spouses and kids). But maybe if you talked to him, he'd be willing to let you manage it if you were funding it? Would he still raid it then? You could have the agreement be that all correspondence come to you and he doesn't know where it's at, but still have him know it exists.
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NoNamePerson
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Post by NoNamePerson on Sept 17, 2020 15:55:42 GMT -5
What about naming the beneficiary? Or is that required for Roth? I know I had to name beneficiary with my IRA. You will need their info unless you name yourself? If asked and answered never mind
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tskeeter
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Post by tskeeter on Sept 18, 2020 2:11:23 GMT -5
The way we did this for some of my siblings was to have the accounts in my name with my siblings as the beneficiary. I am responsible for the taxes because, technically, these are my accounts. The accounts will most likely be transferred to my siblings before my death. At that time, the accounts will be handled as gifts. This means that transferring the accounts to my siblings will consume a portion of our gift and estate tax exemption.
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Deleted
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Post by Deleted on Sept 18, 2020 8:00:33 GMT -5
The way we did this for some of my siblings was to have the accounts in my name with my siblings as the beneficiary. I am responsible for the taxes because, technically, these are my accounts. The accounts will most likely be transferred to my siblings before my death. At that time, the accounts will be handled as gifts. This means that transferring the accounts to my siblings will consume a portion of our gift and estate tax exemption. Except she can't open a Roth in her own name due to income limitations.
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Deleted
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Post by Deleted on Sept 18, 2020 9:16:37 GMT -5
The way we did this for some of my siblings was to have the accounts in my name with my siblings as the beneficiary. I am responsible for the taxes because, technically, these are my accounts. The accounts will most likely be transferred to my siblings before my death. At that time, the accounts will be handled as gifts. This means that transferring the accounts to my siblings will consume a portion of our gift and estate tax exemption. You aren't talking about a Roth, are you? Because I'm confused. There are no taxes on Roths other than ordinary income tax as you earn the money. Roths are after-tax. You would be giving up your own ability to save for retirement since this would count against your ability to contribute. I don't think you can transfer a Roth except by dying. You would have to cash it in and hand them a lump sum. So it is no longer a Roth. Is this a backdoor Roth? I am unfamiliar with them so maybe the rules are different.
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azucena
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Post by azucena on Sept 18, 2020 9:41:35 GMT -5
Wondering if you can open an HSA for another person. That would mean he couldn't pull the money out except for medical expenses, right?
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janee
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Post by janee on Sept 18, 2020 10:05:58 GMT -5
Maybe set up an after tax account in your name, make him the beneficiary. If you both are alive when he retires, make him a monthly payment from the account (so he doesn't blow it all at once).
You're very nice to help him.
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Deleted
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Post by Deleted on Sept 18, 2020 10:11:13 GMT -5
Wondering if you can open an HSA for another person. That would mean he couldn't pull the money out except for medical expenses, right? He'd have to be eligible to have an HSA, but there's nothing stopping people from making non-qualified withdrawals on an HSA either...at least not with my account. So it would be about the same as raiding a retirement account with taxes and penalties.
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justme
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Post by justme on Sept 18, 2020 10:26:29 GMT -5
I believe HSAs have the same 10% plus income taxes that retirement accounts have.
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kent
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Post by kent on Sept 18, 2020 11:28:19 GMT -5
Without plowing through all the previous posts, why not just open a regular brokerage account, fund it as you see fit and name him the beneficiary? Trying to control finances from the grave is not an easy task. Just my opinion and I usually follow my own advice. LOL
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Post by The Walk of the Penguin Mich on Sept 18, 2020 11:39:02 GMT -5
The way we did this for some of my siblings was to have the accounts in my name with my siblings as the beneficiary. I am responsible for the taxes because, technically, these are my accounts. The accounts will most likely be transferred to my siblings before my death. At that time, the accounts will be handled as gifts. This means that transferring the accounts to my siblings will consume a portion of our gift and estate tax exemption. They are already beneficiaries in our will.....but I have to die and have no intention of doing so. Plus, I can’t contribute to Roth’s due to income limitations. In fact, I may have to claw back my 2019 contribution, and definitely won’t be able to make a 2020 contribution.
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Post by The Walk of the Penguin Mich on Sept 18, 2020 11:42:15 GMT -5
Maybe set up an after tax account in your name, make him the beneficiary. If you both are alive when he retires, make him a monthly payment from the account (so he doesn't blow it all at once). You're very nice to help him. But I would have to pay taxes on this and we are already slammed. That’s the point of the Roth, the taxes paid on the deposit and the interest accumulates tax free and at withdrawal.
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Post by The Walk of the Penguin Mich on Sept 18, 2020 11:47:56 GMT -5
Without plowing through all the previous posts, why not just open a regular brokerage account, fund it as you see fit and name him the beneficiary? Trying to control finances from the grave is not an easy task. Just my opinion and I usually follow my own advice. LOL Because I am not trying to control finances from the grave. He is already a beneficiary in our will. I would prefer not to die before he retires and have no intention of doing so. I am trying to take advantage of retirement options for my brother as he cannot afford (or chooses) not to take advantage of them himself. At this point, all he has is SS, and he is 57. If I open an account in my name, I am responsible for the taxes on it. My tax situation is such that we are already slammed.
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Deleted
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Post by Deleted on Sept 18, 2020 12:20:24 GMT -5
Maybe set up an after tax account in your name, make him the beneficiary. If you both are alive when he retires, make him a monthly payment from the account (so he doesn't blow it all at once). You're very nice to help him. But I would have to pay taxes on this and we are already slammed. That’s the point of the Roth, the taxes paid on the deposit and the interest accumulates tax free and at withdrawal. But if you put it in something pretty tax friendly the annual taxes wouldn't be much. I don't have much in taxable (like 8K), in an S&P index fund and the annual dividends that get reported aren't much. Like $100 that gets added to taxable. Of course, you would get slammed when you cashed it in, but could you just gift it at that point before cashing it in? I'm not sure how taxes work on gifted securities.
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Post by The Walk of the Penguin Mich on Sept 18, 2020 12:28:31 GMT -5
But I would have to pay taxes on this and we are already slammed. That’s the point of the Roth, the taxes paid on the deposit and the interest accumulates tax free and at withdrawal. But if you put it in something pretty tax friendly the annual taxes wouldn't be much. I don't have much in taxable (like 8K), in an S&P index fund and the annual dividends that get reported aren't much. Like $100 that gets added to taxable. Of course, you would get slammed when you cashed it in, but could you just gift it at that point before cashing it in? I'm not sure how taxes work on gifted securities. In an investment account, the earnings are calculated yearly and added to our AGI. I am already going to pay about a $300/mo premium on my Medicare due to our current AGI courtesy of IRMA. I am currently paying $200/mo extra now. The point is that I want to take advantage of a retirement vehicle that is available that isn’t being used. Believe me, we run things so tight that it is looking like I need to claw back MY 2019 Roth contribution......by about $100.
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tskeeter
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Post by tskeeter on Sept 18, 2020 12:50:01 GMT -5
The way we did this for some of my siblings was to have the accounts in my name with my siblings as the beneficiary. I am responsible for the taxes because, technically, these are my accounts. The accounts will most likely be transferred to my siblings before my death. At that time, the accounts will be handled as gifts. This means that transferring the accounts to my siblings will consume a portion of our gift and estate tax exemption. Except she can't open a Roth in her own name due to income limitations. MPL, since the poster’s primary objective is to provide a retirement nest egg for her brother, not simply create tax free income, I did not limit my thoughts to Roth accounts. There is a way to fund a Roth account even if your income level would normally prevent you from funding a Roth. That procedure is often referred to as a “backdoor Roth”. A backdoor Roth is usually created by transferring funds from an existing IRA and paying taxes on the value of the transfer. I used this approach to fund a Roth after I retired and no longer had earned income, which is normally required to fund a Roth.
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tskeeter
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Post by tskeeter on Sept 18, 2020 13:14:21 GMT -5
The way we did this for some of my siblings was to have the accounts in my name with my siblings as the beneficiary. I am responsible for the taxes because, technically, these are my accounts. The accounts will most likely be transferred to my siblings before my death. At that time, the accounts will be handled as gifts. This means that transferring the accounts to my siblings will consume a portion of our gift and estate tax exemption. You aren't talking about a Roth, are you? Because I'm confused. There are no taxes on Roths other than ordinary income tax as you earn the money. Roths are after-tax. You would be giving up your own ability to save for retirement since this would count against your ability to contribute. I don't think you can transfer a Roth except by dying. You would have to cash it in and hand them a lump sum. So it is no longer a Roth. Is this a backdoor Roth? I am unfamiliar with them so maybe the rules are different. No, I was not specifically thinking about a Roth. But, my comments could apply to a Roth as well as a variety of other types of accounts. I do understand that contributions to a Roth account are subject to federal income tax and that withdrawals, at least at this point, are exempt from federal income taxes. While a Roth may be the ideal vehicle for the poster to use, the poster’s primary objective is providing a retirement nest egg, not tax avoidance. So, non-Roth accounts could be an option for the poster. I believe you are right, that you can’t transfer a Roth to another person while you are living. However, you could make tax free withdrawals from a Roth account that is in your name and gift the amount of the withdrawal to whoever you want. Handled properly, such a gift could be tax free. Either under the annual gift tax exclusion, if the gift meets the annual limitation on gifts. Or, if the gift exceeds the annual gift tax exclusion limit, under the lifetime exclusion for gifts and estates, which for a couple is currently in excess of $11 million.
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tskeeter
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Post by tskeeter on Sept 18, 2020 13:33:45 GMT -5
The way we did this for some of my siblings was to have the accounts in my name with my siblings as the beneficiary. I am responsible for the taxes because, technically, these are my accounts. The accounts will most likely be transferred to my siblings before my death. At that time, the accounts will be handled as gifts. This means that transferring the accounts to my siblings will consume a portion of our gift and estate tax exemption. They are already beneficiaries in our will.....but I have to die and have no intention of doing so. Plus, I can’t contribute to Roth’s due to income limitations. In fact, I may have to claw back my 2019 contribution, and definitely won’t be able to make a 2020 contribution. Is a back door Roth a possibility?
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jerseygirl
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Post by jerseygirl on Sept 18, 2020 14:15:19 GMT -5
They are already beneficiaries in our will.....but I have to die and have no intention of doing so. Plus, I can’t contribute to Roth’s due to income limitations. In fact, I may have to claw back my 2019 contribution, and definitely won’t be able to make a 2020 contribution. Is a back door Roth a possibility? She would need to pay taxes on the amount going into the Roth and she doesn’t want to pay more taxes. Taking money out of an IRA to convert to Roth via back door means the IRA money taxed as ordinary income and could also increase Medicare IRMAA
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Post by The Walk of the Penguin Mich on Sept 18, 2020 14:29:56 GMT -5
They are already beneficiaries in our will.....but I have to die and have no intention of doing so. Plus, I can’t contribute to Roth’s due to income limitations. In fact, I may have to claw back my 2019 contribution, and definitely won’t be able to make a 2020 contribution. Is a back door Roth a possibility? Yes, but I would be paying 24% tax on it for last year. Next year, it’ll be 32%, possibly 35%.
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