coolhand's Account Talk

[coolhand]

Thanks for your reply. Curious what (and maybe a comment on "why them") self-directed IRA fund you chose? ... Just for my consideration if you care to share, as I'll be looking for one, haven't check-contrasted them recently, don't have experience with them (just invest some via "Robinhood" and not doing great in that since yesterday)... I have a low-fee "family plan" Directed (with input) IRA option that has done very well for some family members and I'd think about splitting mine between that and the Self-Directed IRA. Thx again!

My self-directed IRA is simply one of my Scottrade accounts. I generally trade 3X funds such as TNA, TZA, SPXL, etc. I don't trade much except when I get good set-ups with risk decidedly in my favor.

 

[rspring]

Coolhand, would it not be beneficial to convert to a Roth before you turn 70 1/2 to avoid Minimum Required Distribution? Depending on your balance of course. I am retiring at the end of the month and am in the process of setting up my account to slowly transfer the traditional IRA into a Roth so I can control my tax liability. Am I missing something. Thanks

 

[coolhand]

Coolhand, would it not be beneficial to convert to a Roth before you turn 70 1/2 to avoid Minimum Required Distribution? Depending on your balance of course. I am retiring at the end of the month and am in the process of setting up my account to slowly transfer the traditional IRA into a Roth so I can control my tax liability. Am I missing something. Thanks

When it comes to money and taxes, everyone's situation is different. There are a lot of variables and laws change every year. I was a tax consultant more than 15 years ago and I remember that every year the government would make more than 1,000 tax code changes. I am only going to be 60 at the end of the year and plan to sit down with my CPA in the next few months to map out the next 10 years financial strategy. There are just too many moving parts in an ever changing tax environment and we may need to make adjustments as necessary. Professional help is something most folks should seek out even if you're pretty savvy when it comes to all things financial.

 

[uscfanhawaii]

Coolhand, would it not be beneficial to convert to a Roth before you turn 70 1/2 to avoid Minimum Required Distribution? Depending on your balance of course. I am retiring at the end of the month and am in the process of setting up my account to slowly transfer the traditional IRA into a Roth so I can control my tax liability. Am I missing something. Thanks

If you transfer ALL of your Traditional funds (TSP, IRA, whatever) to a Roth before you are 70.5, there would be nothing to have an RMD on. However, as you transfer the funds, you will be taxed as ordinary income. So I am not sure how you are controlling your tax liability.

It is true that GOING FORWARD you will be controlling your tax liability on whatever your Roth starts earning. Not sure if that is what you had in mind.

But I had a related question. What if you took your RMD and instead of just taking the $$, you rolled it over to a Roth? The Gov't gets their taxes, and you would get to enjoy future earnings tax free. I have a feeling that is not allowed, but I haven't seen it specifically ruled out anywhere.

I am NOT a tax consultant (but I sure have paid a lot of taxes in my 63 yrs!!), So maybe Coolhand, you know more about that(?). :deal:

 

[coolhand]

If you transfer ALL of your Traditional funds (TSP, IRA, whatever) to a Roth before you are 70.5, there would be nothing to have an RMD on. However, as you transfer the funds, you will be taxed as ordinary income. So I am not sure how you are controlling your tax liability.

It is true that GOING FORWARD you will be controlling your tax liability on whatever your Roth starts earning. Not sure if that is what you had in mind.

But I had a related question. What if you took your RMD and instead of just taking the $$, you rolled it over to a Roth? The Gov't gets their taxes, and you would get to enjoy future earnings tax free. I have a feeling that is not allowed, but I haven't seen it specifically ruled out anywhere.

I am NOT a tax consultant (but I sure have paid a lot of taxes in my 63 yrs!!), So maybe Coolhand, you know more about that(?). :deal:

The question one has to answer (among others) is exactly how much (percentage wise) taxes will one pay with a rollover from a traditional account to a ROTH? I know that I am in the 25-28% bracket. If I found out I had to pay 25% or more on a rollover, that's a significant chuck of change that will be difficult to justify. I don't know the answer, but if one is rolling over 6 figures, is current income part of the equation? Even if it isn't, taxes could seriously dampen gains moving forward. I know I can dig into the internet to find out, but I am not the one looking to do such a rollover. The math has to make sense. The other issue is trying to determine what one will make tax free after a rollover. That is a question with no hard answer as it depends on how it's invested and how those investments perform. That's why financial managers make projections, because it's all based on notional expectations. And as I said before, if the tax structure changes to one of lower taxes for middle and lower income families as the current administration desires, that may totally change expectations.

A TSP rollover into a ROTH is not a minor decision. Make sure you fully understand the moving parts involved. I'd seek the advice of a professional (fee only) of such a move and while I am at it, any other financial aspects such as social security for yourself and spouse. That's another issue with lots of moving parts. Once any of these decisions are made, they probably cannot be undone. Look before you leap, so-to-speak.

 

[rspring]

Coolhand, I appreciate all of the responses regarding the Roth conversion. According to my accountant if I rolled everything at once my tax liability would be huge;however, if I convert a smaller amount each year (estimated by him) I could control my taxable amount by not going into the next higher tax bracket. My goal is to convert 100% to the Roth and pay taxes from other sources of income. I am only 58 years old so my investment strategy will not change. If a new tax rate is passed then hopefully this will allow me to convert everything sooner and pay less taxes. Thanks

 

[coolhand]

Coolhand, I appreciate all of the responses regarding the Roth conversion. According to my accountant if I rolled everything at once my tax liability would be huge;however, if I convert a smaller amount each year (estimated by him) I could control my taxable amount by not going into the next higher tax bracket. My goal is to convert 100% to the Roth and pay taxes from other sources of income. I am only 58 years old so my investment strategy will not change. If a new tax rate is passed then hopefully this will allow me to convert everything sooner and pay less taxes. Thanks

I am very happy that your decision is being made with the assistance of a financial professional. :smile:

My comments are not targeted to anyone in particular, though it was your post that started the conversation (thank-you for that).

I'll be seeing my CPA before the end of the year to start mapping out my own financial plan.

 

[coolhand]

Last week was wild ride. Monday starts out with a huge gain, which often meant more upside over the days ahead, but that didn't happen last week. Instead, it chopped around for a couple of days and then plunged Thursday, wiping out the big gains on Monday (and then some). Friday saw more weakness for the most part, but it was contained.

So we got the retest of the lows that I was looking for, but it came sooner than I expected.



Price on the S&P 500 dipped modestly lower on Friday as the big cap index ended the week with a moderate loss.



The DWCPF also saw a moderate loss on the week. Price came very close to testing its 200 dma and momentum is still falling. RSI is still not oversold, however. Hopefully, it doesn't get there.

NAAIM remains bullish. TSP Talk sentiment is neutral. The options look neutral to my eye for Monday as both smart and dumb money are leaning bearish. My intermediate term system is negative with all signals on sells. Breadth is still negative. Momentum remains on a downward tack.

For a long time now, these kinds of readings have meant a turn higher is just about upon us. I took a sizable position in SPXL at the close on Friday given the negative picture. This is still a bull market, but there is a possibility that it's turning into a bear, which means buys may not work so well for awhile. It's still soon to know, unfortunately, but if more support lines get broken, I am going to get more defensive.

I didn't move into the S fund the Friday before last because I wasn't sure it was time. When Monday rallied, I thought I missed my opportunity, but after the rest of the week played out, maybe not. I do have another chance now. Though I missed a move in TSP, I caught some very nice gains in TNA on Monday and sold the same day. I also took a much smaller position on Tuesday's dip and I'm still holding that position for a sizable loss, but those 3X funds can move hard and fast in both directions. I'm playing with the house's money right now, so I can afford to give back some gains.

I'm looking higher for next week, but I am not complacent. I won't hold a losing position for long if this market does not reverse on so much negativity.

 

[uscfanhawaii]

(As) a related question. What if you took your RMD and instead of just taking the $$, you rolled it over to a Roth? The Gov't gets their taxes, and you would get to enjoy future earnings tax free. I have a feeling that is not allowed, but I haven't seen it specifically ruled out anywhere.

I am NOT a tax consultant (but I sure have paid a lot of taxes in my 63 yrs!!), So maybe Coolhand, you know more about that(?). :deal:

just to close the loop on this, I found the following in a google search:
Can I Transfer My RMD to a Roth IRA? - Budgeting Money

So the direct answer is NO, cannot roll over RMD to a Roth. But if you have income and can make the requirements of adding to a Roth IRA, they (IRS) don't care where the $$ comes from. So in essence, you may be able to use your after tax RMD to fund a Roth.

Make sense?? :blink:

 

[coolhand]

Monday's action was not bullish and suggests that a bottom is not yet in, though it may still be close. Something that I did not mention of late is that sentiment does not support a major decline, but there are no guarantees that come with that observation. There are many bears out there now and does not typically bode well for bearish expectations.



The S&P 500 probed lower on Monday, but closed with a modest gain. There was not much attempt at taking price higher.



The DWCPF tagged its 200 dma and closed marginally lower on the day. Momentum continues to fall.

Both the OEX and CBOE are bullish heading into Tuesday, so a mixed picture there. I don't see signs of a bottom, but as I said above, sentiment does not support a whole lot more selling either. I am still holding a long position in my trading account, but TSP remains in the G fund.

 

[alevin]

A Roth conversion account is different than a regular Roth acct. I created a Roth conversion acct back around 2000-2003, somewhere in there, rolled a small non-deductible Trad IRA into it, paid taxes on earnings, since taxes had already been paid on the contributions. and yes, I had to prorate contributions that were already taxed, because you have to prorate based on total value of all existing Trad IRA accounts first. I also had a small tax-deferred Trad IRA at the time, separate account. didn't matter. The conversion rules do not require that you include TSP in the equation for rollover,but If you have a tax-deferred trad ira account and do the Roth conversion incorrectly, the entire tax-deferred trad ira could be declared as being distributed and taxes due on that too.

So if you have a tax-deferred Trad IRA outside account, be careful. good that you are working with an accountant.

 

[coolhand]

Big bounce for Tuesday, but is it turnaround Tuesday? I doubt it.



Price on the S&P 500 gapped higher and closed back above its 50 dma, but we do not have a higher high and volume was not impressive, though momentum is rising.



The DWCPF rallied as well, but from a much deeper level the its big cap cousin. Momentum looks like it is trying to bottom.

I would not be comfortable being a bull just yet. In fact, I sold my long positions today after getting back most of my losses following Monday's big rally last week. So I am not far from even and looking for a better entry back into the market. The options are bearish for Wednesday so I think the market retraces at least some of today's gains. It may take a few up/down days to put in a bottom.

 

[guppie]

When I sold the I fund yesterday due to the bottoming US dollar, I wished I had another tsp move so I could buy S. But I would have gone to G today anyway. I think we get a bump at the open on Wednesday and then travel south all day. Coolhand thanks for sharing your charts and insight, I appreciate you.

 

[guppie]

Looking at todays futures it's obvious I have no idea what I'm talking about :cheesy:

I think we get a bump at the open on Wednesday and then travel south all day.

 

[coolhand]

I was looking lower today and the market pulled back. The action was such that I still don't think the market is ready to turn. And not just because of the weak action.



The S&P 500 gave back a portion of Tuesday's gains on mediocre volume.



Same for the DWCPF, which is still not far from its rising 200 dma.

The options smart money is bearish, while the dumb money is bullish. That's bearish and likely to produce more weakness.

We may bottom by Friday, we'll see. NAAIM reports tomorrow.

 

[coolhand]

I was looking for more selling on Thursday and we did get some. That downside pressure was contained and hints at a possible bottom being near as the market appears to be starting to build an area of support.



Price on the S&P 500 gave back more gains on Thursday and is starting to spend a little bit of time below the 50 dma, which is leveling off. However price does remain above near the top of the cloud and that is providing some measure of support.



The DWCPF was up for most of the day, closing with a modest gain as momentum continues to try to rise off the bottom. The 50 dma is still above and that key average is falling now.

The options are neutral heading into Friday. NAAIM remains steadfastly bullish. Breadth, which had been negative for a few days now, is neutral and slowly rising. My intermediate term system is negative, but appears to be trying to bottom.

I do think a bottom is near or maybe we have already seen it. I'm looking to go long in the S&P 500 (SPXL) and maybe small caps (TNA), but I am not ready to pull the trigger yet. A hard shot lower may get me to take a limited position, however. Friday looks neutral to my eye.

 

[coolhand]

I was looking for more selling on Thursday and we did get some. That downside pressure was contained and hints at a possible bottom being near as the market appears to be starting to build an area of support.

View attachment 42149

Price on the S&P 500 gave back more gains on Thursday and is starting to spend a little bit of time below the 50 dma, which is leveling off. However price does remain above near the top of the cloud and that is providing some measure of support.

View attachment 42148

The DWCPF was up for most of the day, closing with a modest gain as momentum continues to try to rise off the bottom. The 50 dma is still above and that key average is falling now.

The options are neutral heading into Friday. NAAIM remains steadfastly bullish. Breadth, which had been negative for a few days now, is neutral and slowly rising. My intermediate term system is negative, but appears to be trying to bottom.

I do think a bottom is near or maybe we have already seen it. I'm looking to go long in the S&P 500 (SPXL) and maybe small caps (TNA), but I am not ready to pull the trigger yet. A hard shot lower may get me to take a limited position, however. Friday looks neutral to my eye.

 

[coolhand]

Last week, all three TSP stocks funds finished with nice gains. Those gains were primarily derived by Tuesday's big rally.



Since Tuesday's upside pop, price on the S&P 500 has fallen back a bit; tracking sideways and under the 50 dma. Momentum is rising, but not with conviction.



The DWCPF, which also popped to the upside on Tuesday, gave back some of those gains on Wednesday, but rallied from there to end the week with a sizable gain.

Sentiment is somewhere in the middle, but NAAIM remains bullish overall. The options are neutral. Breadth flipped positive on Friday. My intermediate term system is moving toward a bullish stance, but isn't there yet.

I said on Friday that I was looking for an entry back into stocks, but that I was not ready to pull the trigger. I was looking (hoping) for a shot lower, which would have been the temptation that I needed to get back into the market, but that didn't happen. We may have seen the bottom already. It's a tough call to jump back in, however. I am only modestly bullish given the mixed overall technical picture. Improving, yes, but not convincingly. We have not seen a higher high yet, so a move lower again is certainly on the table.

I am modestly bullish as we head into Monday, but not ready to make any moves yet.

 

[Robo5555]

Hello CH, What's your opinion on this forecast? Predicting a downtrend up to 2020. https://tradingeconomics.com/forecast/stock-market

 

[coolhand]

Hello CH, What's your opinion on this forecast? Predicting a downtrend up to 2020. https://tradingeconomics.com/forecast/stock-market

I noticed that the predictive numbers in the link were somewhat modest over time. Seems they are not looking for a huge sell-off; just a long term downtrend. It's going to be tough making money in TSP under those circumstances. But I take all predictions with a grain of salt.