Joseph B . Darby III TAX ADVISOR ular IRA without worries , since the tax math on the required distributions will see it as equal to a Roth at that point .
Joseph B . Darby III TAX ADVISOR ular IRA without worries , since the tax math on the required distributions will see it as equal to a Roth at that point .
Converting In Down Years
Conventional wisdom and popular tax advice suggest that people should convert their regular IRAs or traditional 401 ( k ) s into Roth investments in years when their income is down and their marginal tax rate lower . I have used this technique , but it has limitations and caveats .
Income tax brackets are staggered , and there is only so much income you can convert before you trigger taxes that throw you back into the maximum bracket . Remember , if your current bracket is low and your future bracket is high , a Roth IRA clearly comes out ahead . But if you can convert only $ 100,000 out of your $ 800,000 regular IRA before the tax brackets become indistinguishable , then the strategy has obvious ceilings and limits . It is probably worth doing if you are confident that the “ down ” year tax rate is likely to be materially lower than the one in your retirement year . That ’ s not always easy to judge . But you make the call .
Are Returns The Same For Both IRAs And Roths ?
IRA accounts , whether they ’ re regular or Roth , ought to see the exact same investment returns over time . But in my experience , they do not .
That ’ s because a regular IRA openly invites investors to take disproportionate and even wildly improbable risks . After all , about 40 % of the money belongs to the government , and who really cares if you lose what ’ s going to the feds ? In gambler ’ s parlance , it is like playing with the house ’ s money . Go wild .
A Roth IRA , by contrast and by definition , is after-tax money , which means it is all your money . The income from the investment is yours , tax-free , forever . If you lose it — ouch ! Because it ’ s yours , you might feel an irresistible impulse to invest in high-yielding investments that ( falsely ) suggest your principal is safe and that your interest / dividend return is huge . In fact , Roth IRA account holders are often drawn to invest in high-yield investments with as much risk as equity investments — but without the stratospheric upside .
When involved in investment decisions , I recommend that investors choose both Roth IRA and regular IRAs the way they would any other investment
LEGAL NOTICE
account : They should look for a good , conventional return and be satisfied .
Few people welcome that advice .
JOSEPH B . DARBY III , ESQ ., is an adjunct professor at the Boston University School of Law and the founding shareholder of Joseph Darby Law PC , a law firm that concentrates on sophisticated tax and estate planning for individuals and businesses .
If You Owned a U . S . Dollar LIBOR-Based Instrument Between August 2007 and May 2010 A Settlement Totaling $ 90 Million Could Affect You
There are lawsuits impacting individuals and institutions that entered into over-the-counter financial derivative and non-derivative instruments directly with 17 banks and that received payments tied to U . S . Dollar LIBOR . A Settlement totaling $ 90 million has been reached with MUFG Bank , Ltd ., The Norinchukin Bank , and Société Générale . Earlier settlements totaling $ 590 million were reached with Barclays , Citibank , Deutsche Bank , and HSBC , bringing the total settlement amount to $ 680 million . The remaining Non-Settling Defendants include Bank of America , Credit Suisse , HBOS , JPMorgan Chase , Lloyds , Rabobank , Royal Bank of Canada , Royal Bank of Scotland , UBS , and Portigon .
What are the lawsuits about ? The litigation claims that the banks manipulated the U . S . Dollar LIBOR rate during the financial crisis , artificially lowering the rate for their own profit , which resulted in class members receiving lower interest payments for their U . S . Dollar LI- BOR-Based Instruments from the banks than they should have . Plaintiffs assert antitrust , breach of contract , and unjust enrichment claims . MUFG Bank , Norinchukin , and Société Générale deny all claims of wrongdoing .
Who is included in the Settlement ? You are included if you ( individual or entity ) directly purchased certain U . S . Dollar LIBOR-based instruments from Bank of America , Bank of Tokyo-Mitsubishi , Barclays , Citibank , Credit Suisse , Deutsche Bank , HBOS , HSBC , JPMorgan Chase , Lloyds , Norinchukin , Rabobank , Royal Bank of Canada , Royal Bank of Scotland , Société Générale , UBS , and Portigon ( or their subsidiaries or affiliates ) in the United States ; and owned the instruments at any time between August 2007 and May 2010 . The instruments in the Settlement Class include certain interest rate swaps , forward rate agreements , asset swaps , collateralized debt obligations , credit default swaps , inflation swaps , total return swaps , options , and bonds / floating rate notes .
What does the Settlement provide ? The Settlement will create a Settlement Fund totaling $ 90 million that will be used to pay eligible Class Members who submit valid claims , as well as attorneys ’ fees not to exceed one third of the gross settlement , expenses not to exceed $ 5,500,000 , and service awards to the Class Representatives not to exceed $ 100,000 per Representative . Additionally , MUFG Bank , Norinchukin , and Société Générale will provide certain cooperation to the Plaintiffs in their ongoing litigation against the Non-Settling Defendants .
How can I get a payment ? You can submit a Proof of Claim online or by mail . The deadline to submit a Proof of Claim is December 15 , 2023 . You do not need to submit a Proof of Claim to share in the Settlement if you previously submitted a valid Proof of Claim in the prior settlements and do not seek to modify or supplement your Proof of Claim . You are entitled to receive a payment if you have a qualifying transaction with any of the following banks : Bank of America , Bank of Tokyo-Mitsubishi , Barclays , Citibank , Credit Suisse , Deutsche Bank , HBOS , HSBC , JPMorgan Chase , Lloyds , Norinchukin , Rabobank , Royal Bank of Canada , Royal Bank of Scotland , Société Générale , UBS , or Portigon ( or their subsidiaries or affiliates ). You do not need to have transacted with MUFG Bank , Norinchukin , or Société Générale specifically . At this time , it is unknown how much each Class Member who submits a valid claim will receive . Visit www . USDollarLiborSettlement . com for more information on submitting a Proof of Claim .
What are my rights ? If you are a member of the Settlement Class and you do not file a timely claim , you will lose your right to receive money or benefits from the $ 90 million settlement with MUFG Bank , Norinchukin , and Société Générale unless you submitted a valid claim in a prior settlement in the OTC Action . If you would like to retain your right to file your own lawsuit against MUFG Bank , Norinchukin , or Société Générale , you must opt out of the Settlement Class by September 29 , 2023 . If you stay in the Settlement Class , you may object to the Settlement by September 29 , 2023 .
The Court will hold a hearing on October 17 , 2023 to consider whether to approve the Settlement and approve Class Counsel ’ s request of attorneys ’ fees of up to one-third of the Settlement Fund , plus reimbursement of costs and expenses and service payments to the Class Representatives . You or your own lawyer may appear and speak at the hearing at your own expense . More information about the Settlement is available on the Settlement website , www . USDollarLiborSettlement . com , and in the Long Form Notice accessible on that website , or by calling 1-888-619-8688 .
SEPTEMBER 2023 | FINANCIAL ADVISOR MAGAZINE | 27