Tuesday, August 25, 2009

Conversion to Roth IRA

I just recently read an article about Roth IRA conversions that I wish I would have read in March when the stock market bottomed.

I am by no means an expert on Roth IRA's, so I don't know the ins and outs, but I do know they are great. In case you don't know, a Roth IRA is a type of retirement account where you can contribute after tax earnings and then withdraw the earnings from that account in retirement tax free. There are rules governing these types of accounts, as well as some awesome advantages, but I won't get into those details here. However, I will mention that you can convert traditional IRA's (and apparently some 401(k)'s) into Roth IRA's, although you do have to pay taxes on the money from your traditional IRA that has not been taxed yet. Seems good, but according to most sources I read, the one drawback is that you have to come up with the money to pay the taxes out-of-pocket. If the account value is high, it might be tough to come up with enough money, although it is possible to do partial conversions in order to avoid that problem.

Anyway, the point of this article was that if there is ever a time to convert your traditional IRA into a Roth IRA, it is when the market is down. This is because of the taxes you have to pay. So, let's say you had a pre-tax traditional IRA account worth around $20,000 in October of 2007 when the market topped out. By March of 2009, you might have had only $10,000 left. If you had converted to a Roth IRA in October of 2007, you would have paid taxes on $20,000, but if you converted in March of 2009, you would only have to pay taxes on $10,000. Once converted, the money grows tax free... so you just permanently slashed your tax bill. When the market recovers, you're poised to benefit handsomely. This plan is so awesome, I'm surprised I didn't think of this myself! ;)

Now, the market isn't fully recovered yet, so I'm still considering this possibility for my old 401(k) from my last job, and for Russ' traditional IRA. However, I am definitely waiting at least until January, and hoping the market doesn't roar back before then (which I kind of doubt), because there is a unique opportunity waiting in 2010. Thanks to President Bush, if you convert money into a Roth IRA in 2010, you pay no taxes on it on your 2010 return, half of the taxes on your 2011 return, and the other half of the taxes on your 2012 return. So, you basically have until April 15, 2013, to pay the entire tax bill. That means if I do the conversion in January of 2010, I have over three years to come up with the full tax amount. Awesome! So, if you hear me hoping the market tanks again in January, just know it's for purely selfish reasons and not because I want any more pain for the economy. Okay?

And if you're wondering where my lovely gerber daisies went, they were being hosted by our old internet service provider, and when we moved and canceled our account, they went bye-bye. Hmm... I didn't think about that. I'll put something new up when I get the motivation (just don't hold your breath).

Sunday, August 9, 2009

Clothing kids is expensive

It's that time of year... back to school! Moms across the country are jumping for joy at the thought of a little peace and quiet.

But it's also the time of year when we realize that the pants from last year are now high-waters and/or riddled with holes. And when you start thinking about that, you start realizing they need a lot of other new stuff, too, and that just keeps snowballing until you're broke. Let me just tell you about teenage boys, too... there's a reason they eat a mixing bowl worth of cereal and sneak two patties on their burgers at the family barbecue. Will is 13 now, and shopping for church clothes was a bad idea...

The store was a disaster, first of all, due to all the back-to-school shopping going on (what recession?). Second, I had this bright idea of getting him khaki pants this time to keep him cooler in the Arizona weather. You'll see why this idea sucked later. I scoured the rack for a size 14 regular pair of pants, and when I finally found one, I noted that he had a size 16 in his hands. Why? "Just in case the size 14 doesn't fit," he says. Really? He's 13, after all. Well, guess what... we bought the size 16 (what the heck?).

With that over, I realize that a new color of pants will necessitate a new tie and new socks (unexpected expense... that is why my idea about the pants sucked... especially since I just bought him black socks). The shirts at that store were too expensive, so we head on over to another store to find the rest of his outfit. There, I find a nice tie for him, and, of course, when he ties it on at the appropriate length, all that is left of small end of the tie is like two inches. Russ chimes in, "That's not going to work." Thanks a lot, Russ... that tie was $9.99 and probably on sale... what's wrong with a little tie tack at the top? Huh? And, of course, he'd never stoop so low as to wear the clip-on tie that comes with the shirt. Much too distinguished for that! So, we head on over to the men's department to buy ties and socks at higher prices. At this point, I'm thinking, "Are high-waters really that bad?" Seriously.

So anyway, the boys looked smashing at church this week (I drew the line at buying brown shoes to match... black works, doesn't it? Answer yes, or don't answer at all... don't pull a Russ. Totally lie to my kids if you don't think their black shoes and belts go with their khaki pants... k?)

But I'm not done complaining yet! So, the kids seem to grow out of everything they own pretty quickly, and it's like you have to buy a whole new wardrobe for the lot of them every single year! So, you shop and get everything they need, and then the jr. high P.E. teacher springs on you that there is a uniform for P.E., and you get to buy it! Whoopee! Then there are the shoes. For the boys, two pairs of shoes work, but for Paige and Kallie, I need sandals, tennis shoes, and church shoes. And guess what! They grow out of all of them at the same time, so you end up having to buy multiple pairs at once. And just when you think you've got them squared away, the season changes, and you have to buy jeans, jackets, long-sleeved shirts, and then swimwear, too. Anybody else get tired of this routine? Sheesh... I wish I could get a new wardrobe every year ;)

I love them, though... I just wish they'd stop growing out of their clothes ;)