IRA Rules

Question: I am taking a withdrawal from my traditional IRA early (I’m 30), and am wondering how to deal with the taxes..?

I elected to have them withhold 20% federal tax. Will that be enough? My wife and I make a combined $75,000/year, and live in Idaho. Anything I am missing? Anything I’ll need to watch for when i file my taxes in April?
Thank you!

Answer: No that won’t be enough. Don’t forget the 10% penalty for withdrawing retirement funds before age 59 1/2.

Question: How much money should I have already saved at 28 years old?

What is the general rule of thumb? How much should I have saved in 401(k), Roth IRA, emergency funds, towards a down payment of a house, etc.

Answer: You should be bringing home at least your age. (take home pay)
And you should have one years salary (take home) in a savings account.
1/2 in a 401K – half in a savings for emergencies – car for cash – or down payment on house – wedding – honeymoon – etc.
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Inheriting an IRA or 401(k)

Question: Advice on a retired person converting from a traditional IRA to a Roth?

I have a traditional IRA (about 40K) that I am thinking of converting to a Roth IRA. I am retired and about 3 years away from mandatory IRA withdrawals. Knowing full well that I will take a tax hit if I do this, is it a good idea to do this and just let the money grow tax free or should I just steel myself to mandatory yearly withdrawals at age 70 1/2, I can afford the tax hit and my taxable income in 2007 was approx 37K. Thx

Answer: If you have the money in non-tax deferred accounts to pay the taxes on the Roth conversion, then go ahead and make the conversion to the Roth. Don’t convert more than what would put you into the 28% bracket.

According to the Motley Fool:

You can find Roth IRA conversion “calculators” all over the Web to help you with your decision (test several or read reviews first to make sure the calculator you use matches your personal situation best — not all calculators are created equal). We have IRA calculators to help you chose between a regular IRA and a Roth IRA and decide whether to convert an IRA into a Roth IRA:

http://www.fool.com/calcs/calculators.htm#roth

Click on “Should I convert my IRA to a Roth IRA?”