Partial Roth IRA Conversions

Many young clients come to us contributing to Roth IRA’s early in life but find themselves unable to do so when they hit certain income tax brackets. Without going into detail, Roth contributions are not always ideal, even into a Roth 401(K). Regardless, the decision to contribute or convert to a Roth IRA incurs an immediate tax liability. For some, a large Roth conversion can generate too much much taxable income that it increases the owner’s tax bracket to the point that the transaction becomes adverse. Roth conversions are not all or none as Michael Kitces explains.  A Partial Roth conversion is designed to fill up bottom tax brackets over a period of several years. Keeping an eye on future tax obligations and current marginal tax brackets ensures this strategy remains optimal. 

Trump

The Wall Street Journal recently wrote an interesting piece on Donald Trump’s business dealing. Of particular interest is misadventures at the Taj Mahal casino in the 90’s. 

“Mr. Trump bought a class of shares that gave him just a slice of Resorts’ equity, but voting control. From that perch, he pushed through a service contract that would have the company pay him $108 million over five years. He told casino regulators the company could raise the cash needed to finish its casino only by assuring lenders Mr. Trump would remain involved, which this contract did.

Upon news that funding was uncertain, Resorts’ stock plunged. Mr. Trump then told investors the only way to finish the Taj Mahal was for him to buy Resorts at just above its reduced share price. Construction lenders, he said, were put off in part by the high cost of his service contract.”

This type of transaction isn’t exclusive to Trump but like most of what he does, there is a special “Trumpiness” to it.  

China

As the S&P closed slightly below 0% for 2015, the Chinese stock market wasted no time ringing in the New Year, down 7% in 4 hours. The Chinese market was subsequently halted and certain securities will remain frozen for large investors (holding more than 5%) until Jan. 8th, possibly longer. Similarly to last summer, the government has propped up share prices with government funds. The Chinese stock market reminds me a lot of the US in the late 80’s and early 90’s when individual investors ruled the market with penny stocks and “pump and dump” schemes. It’s like the wild west over there right now. 

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