Thursday, June 25, 2009

The Slott Report Mailbag: June 25, 2009

This week, The Slott Report Mailbag is full of "what if" questions complete with the scenario-based verbiage keeping many men and women across America up at night.

We are here to answers those questions in this week's installment.


I have about 43k in liquid cash in my [email protected] .5 %. I will be 59 1/2 years. old in July. Should I start taking money out in July to avoid higher taxes in the future or should I wait to roll-over to Roth in 2010? I would really appreciate your advice in this matter.

Thank you in advance for your help,


If you don't need the money in your IRA to live on, withdrawing it now would not be a good idea. We generally favor Roth IRAs. If you are worried about income taxes rates going up a Roth conversion in 2009, if you qualify, or in 2010 may be appropriate for you. You will pay the taxes in the year you convert and after 5 years all withdrawals will be tax free.


At age 58 I took early retirement from my company and signed up for Level income retirement. I am now approaching 62 and had planned to retire but due to the economy , I will need to keep working. Question is do I go ahead and sign up for the SS at 62 and keep drawing and working or do not sign up due to being taxed heavy due to my extra income? Some say take it now and you will still get a little increase at 66.5 and some say not to retire and just draw the company retirement and retire at 66.5. Due to the economy and losing 48% I really need the company retirement with level income and at 62 I will continue to get it signing up for SS or no difference in retirement income. I make about 54K income and with my retirement with level income it is close to 88K. How much extra in SS tax will I have to pay if I retire at 62 and keep working? Very confusing. I also have a 401K with the company which went from 110K to 72K do I need to roll this over into and IRA now.

Need some help here,

Dale Ballinger

Deciding on when to start taking Social Security is not a simple matter and is very personal to your own situation. In your case, based on your birth date you will be entitled to full retirement benefits at age 66. To learn more and help you make an intelligent decision you can call Social Security at 800-772-1213. Social security also has a web site containing a calculator. and click on "estimate Your Retirement Benefits".


I'm considering converting my traditional IRA to a Roth IRA by your own advise. I will be 58, (July), my traditional IRA is valued under $30,000.00 and a 457 plan at work valued at under $10,000. My question: Should I convert or just open a Roth IRA and start saving in that? What about annuities with a Roth IRA? I have purchased your program and in your book I read something about converting above mentioned IRAs, all restrictions will be removed in 2010 and you can in 2009 convert funds and have until October 15, 2010 to undo. The income limit of $100,000, is that single or married? My survival is more depended on life insurance policies, all term in amounts of $200,000/150,000 upon spouse's death. I also have Mutual Funds, can I
change to a Roth IRA Account (amount is $4500)? Married without bliss, he can't be bothered with all this so I get no help from him although his has a pension from National Guard. His pension doesn't take federal taxes out.


Late Starter

If you don't need your traditional IRA to live on generally a Roth IRA may be appropriate for you. In 2009, if you are married, filling a joint tax return your modified adjusted gross income can not exceed $100,000. In year 2010 and beyond that limit will be eliminated. In addition, if you convert in 2010 the taxes due on the conversion can be paid over two years 2011 & 2012. And yes you will have until October 15th of the following year to undo. They call this process a recharacterization.