vania-janet/multiturn-rag-retrieval-data huggingface dataset:
In the UK you have an allowance of £40,000 per annum for tax relief into a pension. This amount includes both your and your employer's contributions. If you earn more than £150,000 per annum this allowance starts to reduce and if you earn less than the allowance, your allowance is limited to what you earn. You can also carry over unused allowance from up to 3 years previously. If you stick within this allowance you won't pay tax on your pension contributions, if you go over the excess will be subject to tax. Salary exchange normally lets you avoid the National Insurance value of your contribution being taxed. If you paid your own money into your pension (without going through salary exchange), your contributions would have the 20% basic rate of tax credited to them and if you're a higher rate taxpayer you could reclaim the difference between the basic rate of tax and the higher rate of tax you pay but the National Insurance you've paid on your own money would not be reclaimable. You can't get the money back you've paid into your pension till you are are 58 (given that you are 27 now), the minimum age has risen from its historic 55 for your age group.  That's the pension trade off, you forgo tax now in the expectation that, once retired, you will be paying tax at a lower rate (because your income will be lower and you are much less likely to be subject to higher rate taxation) in return for locking in your money till you're older. Your pension income will be subject to tax when you eventually take it. There are other options such as ISAs which have lower annual limits (£20,000 currently) and on which your contributions do not attract tax relief, but which are not taxed as income when you eventually spend them. ISAs and pensions are not mutually exclusive so if you have the money, you can do both. It's up to you to determine what mix of savings will be appropriate to generate income for your eventual retirement. If you are living in some other country when you retire your pension will be paid net of UK tax. You might then be able to claim (or pay) any difference between that and your local tax rate depending on what agreement exists between the UK government and the other country's government.
with me and my wife coming from different countries, and us both living in a non-native country, we have very little clue where we will eventually settle down. The answer depends on where you reside currently, tax rules and ability to move funds. As well as where you plan to settle down and the tax rules there. From what I understand, once you eventually retire and take an annuity from your pension you are then taxed on it as income anyway? Yes and No. For example if you move from US to India, stay in India for 7 years. You then move your retirement funds from US to India the entire amount would be taxable in India. but would this 'freedom' would come with significant costs in terms of savings at retirement? The cost would be hard to predict. It depends on the tax treatments in the respective countries on the retirement kitty.  It also depends on whether the country you are staying in will allow complete withdrawal and transfer of retirement funds without penalty.
If you don't pull the money out of an IRA or 401(k) until you hit retirement age, there are no tax consequences at all. No matter how you invest or ignore it, it won't affect your return. Same for a Roth IRA, unless you move money out of the account before age 59 ½ it's essentially invisible to the IRS. (Because some of a Roth has already had taxes paid, the rules are more complicated if you do pull out the money, whereas the others are just a straight tax penalty with few exceptions.)
"Your SSA payments are not IRA contributions, but they're actually a tax that is earmarked to the Social Security Trust Fund.  As such, no, you don't have any ""contributions"" that can be refunded: you paid a tax, and in exchange for having paid that tax you will possibly later have a benefit. However, some foreign nationals are able to convey that benefit into their national savings plan.  The Social Security Administration has a FAQ page on this particular subject.   Unfortunately for you, Pakistan does not have a bilateral agreement according to their list, so you may be out of luck."
First of all, it's pretty rare that would cash out your entire Traditional IRA at once when you retire. That would incur major taxes and negate much of the tax deductibility benefit. Instead, you'd want to take distributions of just what you want to live on, which are taxed at income rates, and let the rest continue to grow tax free until you need/want it. As to your main question, if you don't expect to be in a lower tax bracket in retirement, then yes, Roth makes sense. But this is a pretty major assumption. When you're working, your salary pushes you into higher tax brackets. Once you're retired, you don't have as many sources of income. It could be mostly distributions from retirement accounts, and even coming from a Traditional IRA a lot of that will be tax free or taxed at a low rate (e.g. 15%). If when it was earned it would have been taxed at a higher marginal rate (e.g. 25%), then the Traditional IRA was a better choice than the Roth. Traditional versus Roth, if both are options to you (with deductibility for the Traditional), all comes down to tax rate now versus what you expect your tax rate to be in retirement. There is no universal answer.
In the same way that you are taxed on the actual amount of money you convert from the Traditional IRA to the Roth IRA -- rather than on the amount of money that you initially contributed to your 401(k) or on the amount of money that you rolled over to your Traditional IRA -- that converted amount becomes the contributions to your Roth. So (3) is the correct answer. It doesn't matter how you accumulated the money in the first place; as long as the IRS has had the opportunity to dig their claws into it, it counts as a contribution to your Roth.
TL;DR: No, it doesn't count against the Roth IRA basis. You can find out by looking at Form 8606 Part III, which is the part for distributions from Roth IRA. Line 19 is the sum of nonqualified distributions, plus qualified first-time homebuyer distributions. You would put $10000 here. Then you would subtract $10000 on line 20 (qualified first-time homebuyer expenses) to get $0 on line 21. You enter your basis on line 22, but since line 21 was 0, you stop. You do not subtract anything from your basis. If you take out more than $10000, then it's only the part over $10000 that is subtracted from your basis.
Time to look at a tax table.  A retired couple hits the top of the 15% bracket with an income of $96,700. (I include just the standard deduction and exemptions.) The tax on this gross sum is $10,452.50 for an 'average' rate of 10.8%.  This is what 2 answers here seem to miss, and the 3rd touches, but doesn't keep going.  The tax, paid or avoided, upon deposit, is one's marginal rate. But, at retirement, the withdrawals first go through the zero bracket (i.e. the STD deduction and exemptions), then 10%, then 15%.  The Roth benefit is maximized  In the end, to choose between Traditional or Roth, one would have to have far more details regarding the person's financial situation. The right choice is rarely 100% known except in hindsight.
If you are inside of a ROTH IRA you are not getting taxed on any gain.  Dividends, distributions, interest payment, or capital gains are never taxed.  This, of course, assumes you wait until age 59.5 to do ROTH withdrawals on your gains.
Yes, it should come out tax free. However you should have reported it  to the IRS at the time (currently it is done on form 8606). If you haven't done it, the IRS may disagree with you on that and require taxes. If you have proper documentation of the contribution, then when you withdraw from your IRA - you use that same form 8606 to calculate the non-taxable portion. Note that you cannot just take $2K out of the 1099-R, the non-taxable portion will be prorated through all of your IRA withdrawals. Also, keep in mind that only the actual after tax portion will be tax-free, the gains will be taxable. I.e.: if you deposited $2K after tax (and nothing else), and they have now grown to $100K - you will only have 2% of your distribution tax free (2k/100K * distributed amount).
No. Income inside an RRSP is sheltered from income tax until you withdraw it. That is, indeed, the major benefit of RRSPs. Note that you will eventually declare this as income. Consider the following case: - in 2015, you make $1000 in income. - in 2015, you contribute $100 to your RRSPs. You store this in an account that pays interest, rather than investing it in stocks, bonds, or mutual funds. - between 2015 and 2025, your money makes an additional $100 in interest. - in 2025, you are retired and pull out the entire amount in your RRSP, i.e. $200. Now, between 2015 and 2025, you did not declare the income from interest. You'd have had to do this if the money was in a regular bank account (instead of an RRSP or a TFSA). Indeed, your bank would have issued tax forms in that case. But you don't report income sheltered in an RRSP. This is good, as it increases the power of compounding. In 2015, you pay tax on only $900 rather than the full $1000. In 2025, you pull out the entire $200. You report all $200 as income (or, actually, as a withdrawal from your RRSP, but it's the same thing). You pay tax on the initial $100 investment (which you did not do in 2015), and you also pay tax on the $100 that your investment has made (and which you are now pulling out). The hope is that your income is now lower, as you are retired. So you'll end up paying less income tax. Plus, your investment has had many years of opportunity to compound, tax-free. TL;DNR: You don't pay tax on, or report gains in, an RRSP account. The bank or investment house won't even issue tax forms, not until you withdraw the money.
From a federal tax point of view, withdrawals from 529 plans are treated as taxable unless they are used on qualified expenses: The part of a distribution representing the amount paid or contributed   to a QTP does not have to be included in income. This is a return of   the investment in the plan. The designated beneficiary generally does not have to include in   income any earnings distributed from a QTP if the total distribution   is less than or equal to adjusted qualified education expenses   (defined under Figuring the Taxable Portion of a Distribution ,   later). [...] To determine if total distributions for the year are more or less than   the amount of qualified education expenses, you must compare the total   of all QTP distributions for the tax year to the adjusted qualified   education expenses. You'll have to include them in your income and pay normal income tax on them, and also in most cases pay an extra 10% penalty: Generally, if you receive a taxable distribution, you also must pay a   10% additional tax on the amount included in income. You'd have to check on the situation from a state perspective but I'd imagine it's quite similar. The basic point is that non-qualified distributions are treated as earnings.
First of all depending on the type of IRA you may not have to pay taxes on withdrawals in the US at all. If you are withdrawing your principle from a Roth IRA then you don't owe taxes. Only when you withdraw the gains do you pay taxes on it. You have two options for withdrawals: Lump Sum Withdrawal: If you take a lump sum withdrawal you will owe taxes to the US (30% for non-resident aliens of the US), and according to DTAA; Article 23, you will file your taxes with India declaring your IRA or 401(k) withdrawal proceeds and claim credit on the taxes you paid to the US.  Monthly Pension Withdrawal: You can also receive monthly pension payments and you will only be taxed in the country in which you are a resident of. This is according to DTAA, Article 20. You would then have to submit necessary documentation to your payer in the US so that they do not withhold any taxes in the US. Just as a side note it might be just better to keep the money where it is and let it grow or roll it over to a Roth IRA if you are currently in a lower tax bracket for maximum savings of your principle. Here is a link with more detailed information of what I provided you: http://articles.economictimes.indiatimes.com/2012-01-25/news/30663129_1_taxable-income-nri-401k-plan
Having 401k or HSA is not income and doesn't trigger filing requirements. Withdrawing from 401k or HSA does. Also, in some States, HSA gains are taxed as investment income, so if you have gains in an HSA and you're a resident of such a State - you'll need to file a State tax return and pay taxes on the gains.
Those aren't distributions, they're contributions.  Distribution is when the money comes out of the retirement accounts. Here is the best source (the IRS) for information about tax advantaged retirement plans.
If I gift 50k to my Father who is retired but getting pension, will I get a 50k tax benefit? If Yes, then under which section would it be? 80C or other? There is no tax benefit for you on the 50K. This can't be deducted under any section. You have to pay tax. if Father's income i.e. Pension+gift doesn't come under tax slab and he doesn't wish to invest in tax saving scheme would I still be getting benefit? See above you do not get any tax benefit.  Other Notes: Edit: Start from zero, you don't have any money. Say for the year 2015-2016, you get Rs 30 lacs salary. After deductions [PF, etc] you pay [say approx] Rs 10 lacs as tax. Now you have Rs 20 lacs. Assuming you survive on thin air and save Rs 20 lacs.  If you invest this 20 lacs into FD. For the year 2016-2017 you will get Rs 2 lacs as interest on 20 lacs. Plus you have salary of Rs 30 lacs. So now your total income is 32 lacs and your tax will go up by around Rs 60,000 [approx 30% of Rs 2 lacs]. Instead if you gift this Rs 20 lacs to your father, there is no gift tax for you or your father. Now your father invested this Rs 20 lacs in FD, he will get an interest of Rs 2 lacs. This can be tax free to him if he does not have any other income. If he has say an income of Rs 2.5 lacs, then he has to pay tax on the Rs 2 lacs at 10% ... Now he can gift you the Rs 2 lacs for 2016-2017 there is no gift tax to you or him.
This is a purely numerical statement that you should be able to check (and you CPA friend should be able to prove, if true).  The general advice, I think, is that you should not use your retirement funds this way, but general advice does not apply equally well to everyone.   You didn't give enough information for us to compute the answer, so you're on your own there.  If you do this (or have the CPA do it), make sure that it accounts for all pluses and minuses that you'll have.  On the minus side, you get any direct penalties in addition to potential loss of right to contribute for a period of time, so make sure you consider both aspects, especially to any degree that you would lose an employer contribution or match.  Also consider the fact that the money already in is tax advantaged, and you won't be able to replace that amount later.  So there will be a compounding effect to what was lost. (This may or may not be balanced by a mortgage interest deduction down the road - My guess is that it will not, but, again, the details of your situation may dictate a different path.  The mortgage interest deduction decreases each year as you pay more principal whereas the compounding from being tax deferred tends to increase each year.)
In the former case, you could end up having to pay the LTA charge with money you haven't actually got yet, and you can ask the pension administrator to instead reduce your pension to pay it. However, there are lots of special cases for defined benefit pensions, mostly for historical reasons, so you should make sure you check with your pension administrator about this. if you die before age 75, at which point the LTA test is applied via either BCE 5C/5D, or BCE 7. After paying the LTA charge if any, your dependents or whoever else you leave it to gets the remainder tax-free. transferring overseas (BCE 8). ""scheme pensions"" under BCE 2 and BCE 3 (I think these are relatively uncommon) some corner cases covered by regulations (BCE 9)"
"I wrote a brilliant guest post at Don't Mess With Taxes, titled Roth IRAs and Your Retirement Income. (Note - this article now reflects 2012 rates. Just updated) Simply put, it's an ongoing question of whether your taxes will be higher now than at any point in the future. If you are in the 25% bracket now, it would take quite of bit of money for your withdrawals to put you in that bracket at retirement. In the case of the IRA, you have the opportunity to convert in any year between now and retirement if your rate that year drops for whatever reason.  The simplest case is if you are now in the 25% bracket. I say go pre-tax, and track, year by year what your withdrawal would be if you retired today.  At 15%, but with a good chance for promotion to the 25% bracket, start with Roth flavor and then as you hit 25%, use a combination. This approach would smooth your marginal rate to stay at 15%.  To give you a start to this puzzle, in 2012, a couple has a $11,900 standard deduction along with 2 exemptions of $3800 each. This means the first $19,500 in an IRA comes out tax free at retirement. If you believe in a 4% withdrawal rate, you need a retirement account containing $500K pretax to generate this much money. This tick up with inflation, 2 years ago, it was $18,700 and $467K respectively. This is why those who scream ""taxes will go up"" may be correct, but do you really believe the standard deduction and exemptions will go away?  Edit - and as time passes, and I learn more, new info comes to my attention. The above thoughts not withstanding, there's an issue of taxation of Social Security benefits. This creates a The Phantom Tax Rate Zone which I recently wrote about. A single person with not really too high an income gets thrust into the 46% bracket. Not a typo, 46.25% to be exact."
Here's an Irish government publication that should give you some background information to get you started. In a nutshell, you get tax benefits, but cannot withdraw money without penalty until you reach retirement age.
"hello – I am a natural born US citizen; I have worked 35+ years in the United States; I have a 401(k), IRA, Social Security benefits. I have researched the ex-patriot possibilities for several years. I've consulted both accountants and tax attorneys. The long answer is: hire tax consultants/attorneys to try to shelter what assets you can. 401(k), IRA, and Social Security benefits are all taxable worldwide to US citizens. unless you become the citizen of your new country of residence, these taxes are unavoidable. since all of the above assets are considered ""pretax"" to the US government, they are all taxable on distribution whether slowly or in lump sum. the short answer is: ""Hotel California""… ""Relax, said the watchman – we are programmed to receive. You can check out any time, but you can never leave…"""
"I'm an American so I don't claim to know anything about Scottish tax law. But just based on what you say above: First, think about how it would work if there were no taxes. If you make a payment against the mortgage, you save 5% in interest. If you put money into a retirement account, you make whatever the profits are on the investment. If that amount comes to more than 5%, then you are better of investing in the retirement account. If it's less than 5%, you are better off paying off the mortgage. As most investments pay significantly better than 5%, this is the superior strategy. On the other hand, apparently you are paying a variable-rate mortgage, but still, mortgage rates are relatively stable. Investment returns vary all over the place and can be negative. So if you are very cautious, that's a reason to pay off the mortgage rather than invest. The younger you are, the less of a concern this should be, as in the long term, investments pretty much always recover lost ground. If you were planning to retire next year I'd have very different advice than if you are planning to retire in 30 years. But sadly, you do have to pay taxes, and that needs to be factored in. So you say that you would have to pay 25% dividend tax on any money you used to pay the mortgage. But the effective tax rate on the retirement money is 15%. So in effect money put against the mortgage pays a 25% tax, and so effectively generates only 5% * .75 = 3.75%. But money invested in the retirement plan pays only 15% tax, and so if the investment returns 3.75% / .85 = 4.4% it would give the same effective return. So if you can invest in something that gives returns of at least 4.4% per year, you're better off putting into the retirement plan than paying off the mortgage. There may be other Scottish tax implications I don't know about. As to ""Substantially less paperwork"", I have no idea how much paperwork is involved in putting money into a retirement account in Scotland.
If he moves his 401K to a Roth all in one go, all the money will be considered income for the year he moves it, and he will have to pay taxes on that income.  If he keeps it in his 401K or rolls it into a traditional IRA, he will only pay taxes on the money as he withdraws it. Bottom line, converting to Roth is almost certainly a bad idea.
"Will it be more money for me now if I don't take it out? Yes Will it be more money for for my retirement if I do? Yes The difference will be the existence of a match and tax-deferral.  If there is a match then you will have an instant 100% gain on the amount that is matched. From a tax standpoint, putting some in your 401(k) now will reduce your taxes this year - you will instead pay tax when you withdraw the money at retirement (the withdrawal will be considered ""income"" at that time). Other decision points: If there is no match, but you still want to add to retirement savings, then you could alternatively put the money in an IRA, which will give you more control over your investments than a 401(k) (which could be good or bad, depending on how investment savvy you are)."
"I believe you are confusing ""retirement"" and ""disability"". If you become disabled, then yes, the above chart you referenced applies to you. The US government will send you a disability check to assist you with living. This is very different from retirement."
"Re:  ""In retirement I don't see how we can   be in a higher tax bracket than we are   now (maybe than we will be if one of   us stops working, we buy a house, we   have a couple of kids, etc)."" That's assuming tax rates remain the same.  What if tax rates go up?  Consider the U.S. deficit and the debt, and unfunded entitlement programs. Even though you may be in a lower bracket in retirement (bracket, as in ordered income ranges), there's still a possibility that at that later point in time, tax rates in general could be higher than today.  So, even though you may find yourself in a lower bracket in retirement, who is to say the tax rate for that bracket won't exceed what you pay today in the higher bracket? Don't think switch.  Rather, I'd consider diversifying retirement savings across both pre-tax and Roth – i.e. make contributions to each type of account – so you're not gambling 100% on which bracket you'll be in, what tax rates will be like in the future, etc. Then, you'll at least have some money in a Roth account that, in retirement, you can do with as you please without having a tax consequence ... assuming the U.S. government doesn't get so desperate as to change the tax-free nature of Roth account withdrawals! :-)"