All Forum Posts by: Mark S.

@Yohannes Kifle, are you referring to a Roth 401(k)?

In your case, Victoria, you should be okay. 401(k) plans are not affected. In fact, some people roll their IRAs (that they're not wanting to convert) back INTO a current 401(k) plan, leaving the only remaining IRA funds that they DO want to convert, to avoid throwing off their ratios.

@Victoria Creighton, My understanding is that the pro-rata rule applies to ALL IRAs with pre-tax funds, including rollover IRAs. The idea is that all IRAs are treated as one big IRA when determining taxes on the conversion. Do a Google search for a Kitces article on this. He does a really good job of explaining, with examples.

what kind of property?

@Henry J. is correct on most of the Roth IRA info. @Scott Trench, you'll want to ensure you're within the income limit threshold to make a direct Roth IRA contribution.  If you're not, there's a way around it but it gets a tad complicated.  You can withdraw CONTRIBUTIONS (not earnings) from a Roth IRA at any time without paying taxes or penalties.  When you pull money out of a Roth IRA, it is viewed as contributions first, THEN earnings (with very few exceptions).  The downside, of course, is that depending on what you invest in and how those investments perform, you could always end up with less than you started with and you obviously can't withdraw what's not there.  

Congrats on properties 3 and 4.  I've been stuck in analysis paralysis for years and keep going back and forth on whether or not being a landlord is for me.  I recently came across a property nearby that looks like a screaming deal and may change my mind.   We'll see. 

@Kevin Moen, now that you've elaborated, yes, I see what you're saying.  Those are some pretty sweet returns.  Why would anyone invest in anything else if they can make 100% cash-on-cash returns?What am I missing here?

Yes, sir!  

@Steve Jeffries, $5K in credit card debt says that you most likely do not have adequate reserves (unless it's at 0% or some intro rate and you really do have the funds to pay it off).  

Does your employer match anything in your 401(k)?  If so, I'd contribute only up to the point of the full match.  Then, and only then, would I redirect additional dollars to saving for rentals.  In this case, you'll likely consider three things:

1.) Contribute to get full 401(k) match, if any.  

2.) Pay off $5K credit card debt. 

3.) Build cash for reserves and rental purchases.  

I'd probably look at maybe pulling equity out of your existing rental first, if possible, before I would volunteer to take a ~40% tax/penalty 401(k) hit.  

Kevin Moen , what do you mean by protecting your gains with roth? Roth has nothing to do with protecting your gains; it has to do with taxation. If anything, if you're talking about CONVERTING pre-tax funds into Roth (ultimately tax-free) funds, doing this with significant gains is the WORST time to do it (although if job loss = lower income, this COULD potentially offset some of the impact.

Yes, depending on the franchise.