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  • Taxes: Pay 15% Now, Or 25% Later? [View article]

    The answer is no. Why would there be a step up in basis within an IRA? Think about it as it is currently in your possession. You bought KMI at 40 within your IRA. It's now @ 27/share. If you sell, do you get to use that tax loss against the income taxes you need to pay? Nope. So why would your heirs?

    As it currently stands, taxable, then IRA, then Roth for withdrawal pattern is correct, but it wouldn't surprise me if they stop the stretch that the pattern will get much, much murkier.

    Nov 2, 2015. 11:50 AM | Likes Like |Link to Comment
  • Taxes: Pay 15% Now, Or 25% Later? [View article]
    I'm not sure what a TIRA is either, but bionic, you are missing one VERY important point. You never have to take a distribution from the Roth. Ever. You already paid the tax on the seed. Whatever the harvest is never has to be touched by you as long as you are alive. (Hopefully) the government won't get a second tax on distributions from it.

    With a regular IRA, you do have to take distributions starting at 70.5 years because the government hasn't gotten its money yet.

    Nov 2, 2015. 11:47 AM | 1 Like Like |Link to Comment
  • Taxes: Pay 15% Now, Or 25% Later? [View article]

    A Roth to your granddaughter is very smart thinking from your sister. Your granddaughter can stretch the RMD over her lifetime tax-free. That is a fantastic gift for her to receive. There are no tax implications, except if she did not take a distribution as required.


    That's what I alluded to. There is no official "stretch" designation, but all the IRA gurus call it that. Since they already received the IRA, they will most likely be grandfathered. Not if, but when, the law will change, the talk is stretching the IRA distribution AT MOST 5 years. The government wants the money now and never intended YOUR retirement funds to be slowly dripped out by your child, grandchildren, or great-grandchildren over many, many years and minimizing the tax that the government desperately needs.

    Reading between the lines, I do lean more towards the latter. I don't like the government changing the rules on retirement accounts when they want to and I would not get a major benefit by setting up a 401k within my business. I like having the ability of control even if it means, using the article as the example, having less spending power in the future within my taxable account.

    My .02, reinvested.

    Nov 2, 2015. 11:39 AM | 1 Like Like |Link to Comment
  • Taxes: Pay 15% Now, Or 25% Later? [View article]

    I will be happy to correct you. But first, I commend you on trying to attempt this article. I myself tried about a year ago and found the variables just too confusing as I would not know how to convey the information. To that end, congratulations. But I will add another wrinkle at the end of your bullet points:

    -First, most brokerages will not allow you to start an account without having a designated beneficiary form done at the start of application, especially IRAs. So, no estate issue unless your beneficiaries have died before you.

    -Second, unless your spouse is the beneficiary (and depending on your age), ALL other beneficiaries must take RMDs and ideally it would be stretched over that person's lifetime to get the maximum value and minimize the tax hit (and this is where I will expand as the rules - they are a changin')

    -Third, the Roth. If you are the beneficiary and NOT the spouse, you must take RMDs. Yes, the withdrawals are not taxed, but you still must make a withdrawal.

    -Fourth, investment accounts should have beneficiary forms filled out that supercedes a will and bypasses estate issues. The best idea, is to use the Jim Lange Cascading Beneficiary Plan so each person has the chance to disclaim and continue down the path for maximum options.

    Back to the point I wanted to make Mark, which you did not mention - the death of the stretch IRA. I don't know when, but it will be very soon, that the IRA inherited by a non-spouse will have to be completely withdrawn in either 5, maybe 10 years vs the current lifetime stretch. So, if a 2 year old inherited an IRA, they would be able to take RMDs for nearly 80 years, allowing for some massive compounding and multi-generational wealth. Instead, it will become 5 years (maybe 10 but let's just stick with 5) and gone. No taxes with the Roth, but there could be huge tax consequences with a traditional IRA.

    So here's the wrinkle: thinking past your spouse and her tax bills, what account is best for your kids? Is it an IRA that could have $500,000 in it and they get hit with a nice $215,000+ tax bill OR is it the taxable account that now has a step-up basis in cost when both you and your wife die?

    I don't think you can create a spreadsheet to design that question.

    Nov 1, 2015. 10:49 PM | 5 Likes Like |Link to Comment
  • Can We Value Average Our Dividend Income? [View article]

    That's why I put in the rolling last twelve months. It will smooth out the annual or semi-annual dividends to include all dividends. You will see a gradual increase over time. Especially with adding money you will easily eclipse that 3%/yr. As someone mentioned above, if you subtracted taxes out from your dividend stockpile, then I would have a much harder time keeping that 4% increase in check, but I just wanted to expand on the concept that you brought to light.

    Oct 21, 2015. 09:12 PM | Likes Like |Link to Comment
  • Can We Value Average Our Dividend Income? [View article]

    Thanks for the comment. I am aware of RAS website and over 8% DGR for the long haul, but that is also showing the company increasing the dividend each and every year and not an average over X years.

    What you also forget is the income can grow 17 % a year if you reinvest the dividends and the third component of adding more money to dividend paying stocks. I am not saying to find companies that only increase the dividend 17% each and every year. That's not feasible.

    Oct 15, 2015. 11:29 PM | Likes Like |Link to Comment
  • Can We Value Average Our Dividend Income? [View article]

    You got it. There are times you may have to stretch and other times you may have some breathing room. This gives you some idea of, "If I want to hit my goal, do I have to look at a 5% yielder like Realty Income or can I purchase ROST and hope for the continued significant double digit dividend growth?"

    Oct 13, 2015. 08:29 AM | 1 Like Like |Link to Comment
  • Can We Value Average Our Dividend Income? [View article]

    Thanks for the comment. I tried to set the parameters ahead of time, but I understand your point. I am self-employed, but many are corporate and have the fantastic ability to put money into their 401K and are allowed to choose any stock, not just a few garbage mutual funds. The same concept can work and they don't have to worry about taxes, maybe trading costs. And with costs, if you have enough assets, Merrill Edge will give you 30 or 100 free trades a month. Or others that do it cheap enough to not be a huge drag.

    I guess my purpose of the article was how to benchmark dividend growth in a systematic way. People benchmark the asset growth by comparing to whatever standard index is out there. I now have a clear path on how to get where I want to get.

    Thank you again.

    Oct 13, 2015. 08:26 AM | 1 Like Like |Link to Comment
  • Dividend Paying Whole Life Insurance - The Alternative Fixed Income Vehicle (Part 3) [View article]

    Thanks for catching that. I think the article is so old I can't edit, but you are correct. In this example, one is allowed up to $2.5 million in death benefit. As this is structured, $60,000 in premium will get you $2.1 million in death benefit. So each dollar in PUAs gives approx. $4 in DB.

    Thanks for catching that, but remember the reason for this structure is not the death benefit, but to use the cash value within the policy while one is alive.
    Oct 6, 2015. 11:47 AM | Likes Like |Link to Comment
  • Stocks That Double Their Dividends Beat The Market By 17% [View article]

    If you really want to see alpha for something like this, try the price 24 months after they declared to double their dividend.

    Sep 25, 2015. 06:53 PM | 2 Likes Like |Link to Comment
  • The All-Value Team: 35 Dividend Stocks With Yields Higher Than Their 5-Year Averages (Part 7) [View article]
    Blue Sky's comments are confusing as he is mixing up too many rules.

    rhiannion: There is no age limit on doing the transfer from IRA to Roth. However, as you stated, you pay the taxes for that year on the amount transferred. The other caveat is with you being close to 70.5 years of age, your RMD cannot be used as the transfer. Any value past the RMD can and you will pay taxes on that for that calendar year by April 15 of the following year.

    cereeves: You are SOOOO far ahead it is fantastic to hear. Being so young, you can probably go down to 4 months of expenses if needed and invest the other 8. I would wait for the big drop, if it ever comes again, to do that. But that is a psychological thing on how comfortable you feel to SWAN knowing you have that much cash on hand.

    Back to your Roth question, let's keep it simple and say it is 5 years after your initial deposit. ANY money you take out is tax-free. It doesn't matter if it's principal, gains, losses, dividends. It's all tax free. End of story. And you have no age requirement to ever take the money out during your lifetime. Once it gets inherited, there are different rules and I wrote an article about that a while back. But those rules will probably be different by the end of the decade.

    Sep 9, 2015. 02:01 PM | 1 Like Like |Link to Comment
  • The All-Value Team: 35 Dividend Stocks With Yields Higher Than Their 5-Year Averages (Part 7) [View article]

    Congrats on starting so young. You will get to your end point just because of starting so early in life.

    You are confusing a regular 401K/IRA with a Roth. Since you are dealing with after tax money, you can take out the principal at anytime and any gains after 5 years from the first deposit into your Roth without penalty. You can also leave your Roth there forever and never have to withdraw, or just let it compound for decades and decades. This account does not have the 70.5 year age rule.

    Best of luck.

    Sep 9, 2015. 08:12 AM | 5 Likes Like |Link to Comment
  • 2016 Expansion Of The Panama Canal Should Energize These Dividend Growth Stocks [View article]
    Is there any withholding or dividend penalty with BLX?
    Sep 1, 2015. 09:36 AM | Likes Like |Link to Comment
  • How To Return To Oil Sector Investing [View article]
    Jul 19, 2015. 06:16 PM | 1 Like Like |Link to Comment
  • How To Return To Oil Sector Investing [View article]
    I'm glad people are commenting about this ETN. I like it, still own it for the income perspective, but thoughts on two things:

    1) Is anyone perturbed by the fact that the 80-90% individual components are raising distributions quarterly yet the dividend on this thing is creeping down as compared to the year prior? If you go to etracs, you can track it and see the decline. That's one part that bothers me.

    2) Will Alerian expand the scope of the definition and give a broader sense of what "infrastructure" means, so it can include something like KMI since there is no public MLP within the Kinder family anymore? In other words, can it use the C-corp as the proxy when an MLP doesn't exist? Having something like Kinder not in this when it is only the largest pipeline company in the country does hurt its cache.

    Jul 19, 2015. 01:26 PM | 2 Likes Like |Link to Comment