How to handle non-deductible IRAs
ESPlanner currently does not directly handle non-deductible IRAs (and 401ks).
It has been suggested to use, in the Retirement Accounts, the tabs "Contributions" (Special Expenditures) and "Special Withdrawals" (Special Receipts).
Can you please give an example of how to use these fields. Keeping this simple, assume that my IRAs field on the Retirement Accounts page now has $100,000. All of it is non-deductible so only the investment income generated over the years at varying rates will be taxed on withdrawal. I no longer work so have no future contributions. All I will have are future withdrawals.
Others who are working might like to see an example of how to make contributions.
Thank you.
RSS
Linda,
If you aren't eligible to contribute to a Roth, you may be able to contribute to a non-deductible traditional IRA. Or you may have contributed to such accounts in the past.
Unlike a traditional IRA, contributions to a non-deductible IRA are not excludable from adjusted gross income. On the other hand, only the investment income portion of withdrawals, rather than the total withdraw, is subject to income taxation.
Our program does not formally incorporate non-deductible IRAs. But you can
1. enter future contributions to these accounts as non-tax related special expenditures. You click Special in the menu list and then click on the Special Expenditures tab. Special Expenditures are not referencing Contributions to Retirement Accounts. They refer to Special Expenditures.
2. enter a) the future withdrawals of the principal of these contributions as non-taxable special receipts and b) the future withdrawals of the investment income earned on these contributions as taxable special receipts. Withdrawals based on existing non-deductible IRA account assets can be treated the same way.
To enter special receipts, you click Special in the menu list and then click on the Special Receipts tab. Special Receipts are not referencing Special Withdrawals. They refer to Special Receipts.
Please call me at 617 834 2148 if anything remains unclear. best, Larry
New User so expect newbie level queries.
If I do as above for my mixed Non-deductible and Deductible IRAs listing any contributions as special expenditures and withdrawals as special receipts, then what do I do with the earlier spots where I entered the current value of my IRAs under Retirement Accounts/Assets. The program will draw those down in planning, correct? But, now I'm accounting for the withdrawals as special receipts. So, do I then delete the IRA accounts from Retirement and then manually calculate how much to withdraw each year?
Dave T.
If I understand your question, those retirement assets which you enter on that page are drawn down in the order you specify. This question is only with respect to non-deductible IRA's/assets and doesn't affect ones you have entered on that page.