Author Topic: Relatives who just don't get it  (Read 882713 times)

solon

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Re: Relatives who just don't get it
« Reply #3600 on: September 06, 2017, 02:43:23 PM »
I seriously had to read this like 5 times before I realized you didn't buy the car when YOU were 8 years old.

I need more sleep....

I did the same thing. In fact, I didn't know until NOW, that he wasn't 8 years old.
Is my writing that bad? :P

No, I was just reading too fast. I was thinking, "8? How could he buy a car at 8? Maybe his dad bought it for him, and he paid Dad back? Or, I don't know, he's mustachian, maybe he actually DID buy it at 8..." and then I moved on.

Goldielocks

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Re: Relatives who just don't get it
« Reply #3601 on: September 06, 2017, 02:48:04 PM »
Hey Candace, I keep thinking "He's 29" !!!   It may be time to stop trying to help his decisions? 

I think I would just sit down and explain what date staying with you will come to an end (or when it will go up to $500+ per month if you like the money and the nice tenant that comes with it)....   eg.,  pick the month that reflects the elite grad school or coast guard dates.   

If he chooses to stay -- you could get yourself a different car if you like... 


--  re: research, I, too, like research and would do this for a friend, not only for a younger stepson, so that was just nice and helpful of you, not "too personal" at all --

Candace

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Re: Relatives who just don't get it
« Reply #3602 on: September 06, 2017, 03:06:40 PM »
My problem with all this is that I’m taking it a bit way too personally.

FTFY.

{Grin} I do have to own that. I'm doing well so far though, in not talking about it with DS or DH. I come to this forum to vent. Both DH and I made our case to DS before he bought the car, and he's a grownup who's going to make his own decisions. It is a fault of mine, though, that when I have helped others out with $$ and they inevitably use that help to enable more bad decisions, that I feel slighted. In the case of DS, he and I are both getting a good deal on his living arrangements. I do enjoy the additional cash that's definitely in excess of the amount his living here must add to my utilities. And his being here enables he and DH and I to spend a lot of time together. A lot of it is quality time and DH definitely uses it to repeat good fatherly advice in spades.

In the past I've "loaned" my brother $4k to post bond when he got arrested for not paying traffic and parking tickets, "loaned" friends airfare for a vacation we were taking together and later found out they blew more money than we'd "loaned" them on a shopping spree, and given my nephew money to fix his car because I thought he was using it to get to college, when in fact he'd dropped out and hadn't told anyone. As mustachepungoeshere succinctly pointed out, my internal reaction is less than stellar. If I'm whining about DS's negative patterns, I have to be willing to acknowledge my own. I will do better in the future and not assume people will use my help in the way I would want them to, and will let things go more easily.

Sibley

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Re: Relatives who just don't get it
« Reply #3603 on: September 06, 2017, 08:41:33 PM »
My problem with all this is that I’m taking it a bit way too personally.

FTFY.

{Grin} I do have to own that. I'm doing well so far though, in not talking about it with DS or DH. I come to this forum to vent. Both DH and I made our case to DS before he bought the car, and he's a grownup who's going to make his own decisions. It is a fault of mine, though, that when I have helped others out with $$ and they inevitably use that help to enable more bad decisions, that I feel slighted. In the case of DS, he and I are both getting a good deal on his living arrangements. I do enjoy the additional cash that's definitely in excess of the amount his living here must add to my utilities. And his being here enables he and DH and I to spend a lot of time together. A lot of it is quality time and DH definitely uses it to repeat good fatherly advice in spades.

In the past I've "loaned" my brother $4k to post bond when he got arrested for not paying traffic and parking tickets, "loaned" friends airfare for a vacation we were taking together and later found out they blew more money than we'd "loaned" them on a shopping spree, and given my nephew money to fix his car because I thought he was using it to get to college, when in fact he'd dropped out and hadn't told anyone. As mustachepungoeshere succinctly pointed out, my internal reaction is less than stellar. If I'm whining about DS's negative patterns, I have to be willing to acknowledge my own. I will do better in the future and not assume people will use my help in the way I would want them to, and will let things go more easily.

Better solution: no more loans.

SuperSecretName

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Re: Relatives who just don't get it
« Reply #3604 on: September 06, 2017, 08:56:00 PM »
my kids have all tried to get me to buy them Apple phones over the last couple years because they say there group chats with their teams they cant be in. I said you want one fine, you pay the upcharge not me. Is there an app or something I can suggest? Im tired of this response but I am not caving.
as the parent of two middle schoolers, you are potentially very wrong.

you can try to pick this battle, but you will lose. you will not be able to change your kids' friends' behavior.  If you live in my area, your kids will and are being left out.

obviously certain locales and peer groups are different.  But, I would not be so quick to write this one completely off.

you can get a 5s for $100

Playing with Fire UK

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Re: Relatives who just don't get it
« Reply #3605 on: September 07, 2017, 12:05:35 AM »
... I feel good about my choice, although it does make me feel grumbly to see his beautiful new car with all the new-car look, new-car amenities etc. Having my car for all these years is part of why I'm now FIRE, though. As I said to DH, it would be nice to have a new car, but I'd be driving it to the office five days a week if I did. I'd rather have my old car and have my freedom.

You are always welcome to come and vent here, but it seems like you have more thinking to do about your feeling on the new shiny car.

In DS's story (that I am making up and don't know), he mentions needing to replace the car, you recommend a used Accord. He is scared of the repair costs so doesn't want a used car and buys a new Accord (one of the models you recommended). You acknowledge that the new Accord has shiny-trinket-value that an older car didn't. He bought a car, he didn't buy a car at you.

If you raise the rent now, it could look like you are responding out of jealousy of the shiny new car, or you don't like how your car looks next to this one, which is a petty response. This could damage your relationship.

Before deciding on the rent, think about how many of your feelings are caught up in your older car, your pride of buying a used car outright and keeping it running for so long. DS's decision is not a reflection on you or a rejection of your choices, it is a different choice for a different person.

Candace

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Re: Relatives who just don't get it
« Reply #3606 on: September 07, 2017, 07:01:23 AM »
... I feel good about my choice, although it does make me feel grumbly to see his beautiful new car with all the new-car look, new-car amenities etc. Having my car for all these years is part of why I'm now FIRE, though. As I said to DH, it would be nice to have a new car, but I'd be driving it to the office five days a week if I did. I'd rather have my old car and have my freedom.

You are always welcome to come and vent here, but it seems like you have more thinking to do about your feeling on the new shiny car.

In DS's story (that I am making up and don't know), he mentions needing to replace the car, you recommend a used Accord. He is scared of the repair costs so doesn't want a used car and buys a new Accord (one of the models you recommended). You acknowledge that the new Accord has shiny-trinket-value that an older car didn't. He bought a car, he didn't buy a car at you.

If you raise the rent now, it could look like you are responding out of jealousy of the shiny new car, or you don't like how your car looks next to this one, which is a petty response. This could damage your relationship.

Before deciding on the rent, think about how many of your feelings are caught up in your older car, your pride of buying a used car outright and keeping it running for so long. DS's decision is not a reflection on you or a rejection of your choices, it is a different choice for a different person.

I'm not raising the rent. I had just mentioned that I had set the rent low because I wanted to help him get his new head start while he was still a student, and that's still true. He's made a decision that shoots holes in the advantage I was trying to give him by having the rent be cheap. It also went against what he originally said he was going to do (buy a cheaper used car) and against what DH and I both had recommended. That said, he's a grownup, able to change his mind, and responsible for his own decisions. And as Sibley said, I'll be more careful in the future about giving people money.

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Re: Relatives who just don't get it
« Reply #3607 on: September 07, 2017, 10:27:14 AM »
... I feel good about my choice, although it does make me feel grumbly to see his beautiful new car with all the new-car look, new-car amenities etc. Having my car for all these years is part of why I'm now FIRE, though. As I said to DH, it would be nice to have a new car, but I'd be driving it to the office five days a week if I did. I'd rather have my old car and have my freedom.

You are always welcome to come and vent here, but it seems like you have more thinking to do about your feeling on the new shiny car.

In DS's story (that I am making up and don't know), he mentions needing to replace the car, you recommend a used Accord. He is scared of the repair costs so doesn't want a used car and buys a new Accord (one of the models you recommended). You acknowledge that the new Accord has shiny-trinket-value that an older car didn't. He bought a car, he didn't buy a car at you.

If you raise the rent now, it could look like you are responding out of jealousy of the shiny new car, or you don't like how your car looks next to this one, which is a petty response. This could damage your relationship.

Before deciding on the rent, think about how many of your feelings are caught up in your older car, your pride of buying a used car outright and keeping it running for so long. DS's decision is not a reflection on you or a rejection of your choices, it is a different choice for a different person.

I'm not raising the rent. I had just mentioned that I had set the rent low because I wanted to help him get his new head start while he was still a student, and that's still true. He's made a decision that shoots holes in the advantage I was trying to give him by having the rent be cheap. It also went against what he originally said he was going to do (buy a cheaper used car) and against what DH and I both had recommended. That said, he's a grownup, able to change his mind, and responsible for his own decisions. And as Sibley said, I'll be more careful in the future about giving people money.

This, I think, has to be the core of what hurts.

You're giving something up in order to provide someone with an advantage to help him get out of a dependent situation. The recipient of your gift then turns around and uses the advantage you sacrificed to provide, to make a decision that will extend his period of dependency.
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Re: Relatives who just don't get it
« Reply #3608 on: September 07, 2017, 11:19:48 AM »
My problem with all this is that I’m taking it a bit way too personally.

FTFY.

It may be the reason that you're taking it so personally is not his actions now but that he asked your advice before ignoring it.  You took time and effort to help him, and he discarded your opinion after soliciting it.  It's annoying behaviour and I suspect if he'd just gone out and bought the car on his own without dragging you into it you wouldn't feel so bad.  Like this, you feel misplaced guilt that if you had done a better job of explaining things he would have made better choices.

I've heard people like this called askholes. 

merula

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Re: Relatives who just don't get it
« Reply #3609 on: September 07, 2017, 01:20:46 PM »
It may be the reason that you're taking it so personally is not his actions now but that he asked your advice before ignoring it.  You took time and effort to help him, and he discarded your opinion after soliciting it.  It's annoying behaviour and I suspect if he'd just gone out and bought the car on his own without dragging you into it you wouldn't feel so bad.  Like this, you feel misplaced guilt that if you had done a better job of explaining things he would have made better choices.

I've heard people like this called askholes.

In the words of the great Dan Savage, it's advice, it's not binding arbitration. I think we've all asked for advice from various people that we didn't end up taking for one reason or another. Maybe it was bad advice (I don't think Candace's advice was bad at all, for the record), maybe it was not quite the way we wanted to go, or any number of other things.

And DS did end up taking some of Candace's advice. He went with the model of car suggested, but just not the year. And that's not an inherently terrible decision; it's a decision informed by his experience of owning a Cherokee and the accompanying inflated sense of how frequently cars need repairing.

I think of ask-holes as being over-askers of advice to begin with and then ignoring all of it.

marielle

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Re: Relatives who just don't get it
« Reply #3610 on: September 07, 2017, 01:50:11 PM »
It may be the reason that you're taking it so personally is not his actions now but that he asked your advice before ignoring it.  You took time and effort to help him, and he discarded your opinion after soliciting it.  It's annoying behaviour and I suspect if he'd just gone out and bought the car on his own without dragging you into it you wouldn't feel so bad.  Like this, you feel misplaced guilt that if you had done a better job of explaining things he would have made better choices.

I've heard people like this called askholes.

In the words of the great Dan Savage, it's advice, it's not binding arbitration. I think we've all asked for advice from various people that we didn't end up taking for one reason or another. Maybe it was bad advice (I don't think Candace's advice was bad at all, for the record), maybe it was not quite the way we wanted to go, or any number of other things.

And DS did end up taking some of Candace's advice. He went with the model of car suggested, but just not the year. And that's not an inherently terrible decision; it's a decision informed by his experience of owning a Cherokee and the accompanying inflated sense of how frequently cars need repairing.

I think of ask-holes as being over-askers of advice to begin with and then ignoring all of it.

I think some of this is true, but then again he didn't say he was buying the car before he did it. Not that he needed "approval", but it seems pretty clear that he did it without saying anything /specifically/ because they wouldn't have approved. I would have done the same (if I made ever the decision to buy a new car without a solid income, which I wouldn't). Then he tried to justify it to them, and possibly even to himself because now he feels great about being the first owner and is thinking he's going to drive it 20 years. A very emotional decision was made based off of past experiences.

And just because it could have been worse doesn't mean it was a decent decision. I would be upset too if I was letting someone live for so cheap just for them to go pull out their retirement money and buy a $20k+ car. He doesn't even feel like taking this loan out was a risk because he has such a great fallback of living cheaply (in his mind, perhaps even free if shit hits the fan) and going to a cheaper school.

zolotiyeruki

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Re: Relatives who just don't get it
« Reply #3611 on: September 07, 2017, 02:05:40 PM »
It may be the reason that you're taking it so personally is not his actions now but that he asked your advice before ignoring it.  You took time and effort to help him, and he discarded your opinion after soliciting it.
Heh, so the annoyance I feel when DW asks for meal ideas for the next week, then rejects all of them, is not unique to me?  Good too know.

JordanOfGilead

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Re: Relatives who just don't get it
« Reply #3612 on: September 07, 2017, 02:20:03 PM »
He did raid his IRA for the $7k down payment. Someone upthread thought he didn't, so I wanted to clarify.

Ah, damn. That is idiotic. At 0.9% interest I would try to put as little money down as possible, especially if the down payment had to come from retirement accounts. I hope it was at least from a Roth IRA so there aren't penalties?
There's an early withdraw penalty, even for Roth IRAs, if you pull it out before the age of 55 and don't replace it within a certain period of time. Ask me how I know.
« Last Edit: September 07, 2017, 02:22:17 PM by JordanOfGilead »

dandarc

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Re: Relatives who just don't get it
« Reply #3613 on: September 07, 2017, 02:35:45 PM »
There's an early withdraw penalty, even for Roth IRAs, if you pull it out before the age of 55 and don't replace it within a certain period of time. Ask me how I know.
You can withdraw Roth IRA contributions at any time, tax and penalty free.  Assuming you have records to back it up if audited.  Perhaps it was a Roth 401K or you went beyond your contribution amounts?
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Candace

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Re: Relatives who just don't get it
« Reply #3614 on: September 07, 2017, 02:35:46 PM »
He did raid his IRA for the $7k down payment. Someone upthread thought he didn't, so I wanted to clarify.

Ah, damn. That is idiotic. At 0.9% interest I would try to put as little money down as possible, especially if the down payment had to come from retirement accounts. I hope it was at least from a Roth IRA so there aren't penalties?
There's an early withdraw penalty, even for Roth IRAs, if you pull it out before the age of 55 and don't replace it within a certain period of time. Ask me how I know.

You're right. He'll have to pay a 10% penalty. He probably won't have any regular old taxes to pay, though, because Roth contributions are made with money that's already been taxed. As long as he opened the account at least five years ago (I think so) and he only withdraws contributions and not earnings. But at the least, he'll have the 10% penalty unless he can repay the withdrawal in time. All the more "reason" DS may decide to follow up the car loan with a student loan, so he can repay his Roth as well as make car payments.

RWD

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Re: Relatives who just don't get it
« Reply #3615 on: September 07, 2017, 02:36:12 PM »
He did raid his IRA for the $7k down payment. Someone upthread thought he didn't, so I wanted to clarify.
Ah, damn. That is idiotic. At 0.9% interest I would try to put as little money down as possible, especially if the down payment had to come from retirement accounts. I hope it was at least from a Roth IRA so there aren't penalties?
There's an early withdraw penalty, even for Roth IRAs, if you pull it out before the age of 55 and don't replace it within a certain period of time. Ask me how I know.
I thought the penalty was for withdrawing more than the contributions (investment earnings). Wouldn't penalties interfere with a Roth conversion ladder? I would like to ask how you know. Can you point me to the relevant irs.gov page(s)?

Candace

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Re: Relatives who just don't get it
« Reply #3616 on: September 07, 2017, 02:37:48 PM »
He did raid his IRA for the $7k down payment. Someone upthread thought he didn't, so I wanted to clarify.
Ah, damn. That is idiotic. At 0.9% interest I would try to put as little money down as possible, especially if the down payment had to come from retirement accounts. I hope it was at least from a Roth IRA so there aren't penalties?
There's an early withdraw penalty, even for Roth IRAs, if you pull it out before the age of 55 and don't replace it within a certain period of time. Ask me how I know.
I thought the penalty was for withdrawing more than the contributions (investment earnings). Wouldn't penalties interfere with a Roth conversion ladder? I would like to ask how you know. Can you point me to the relevant irs.gov page(s)?

https://www.irs.gov/publications/p590b/ch02.html . There's a handy flow chart if you scroll down.

JordanOfGilead

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Re: Relatives who just don't get it
« Reply #3617 on: September 07, 2017, 02:42:07 PM »
He did raid his IRA for the $7k down payment. Someone upthread thought he didn't, so I wanted to clarify.
Ah, damn. That is idiotic. At 0.9% interest I would try to put as little money down as possible, especially if the down payment had to come from retirement accounts. I hope it was at least from a Roth IRA so there aren't penalties?
There's an early withdraw penalty, even for Roth IRAs, if you pull it out before the age of 55 and don't replace it within a certain period of time. Ask me how I know.
I thought the penalty was for withdrawing more than the contributions (investment earnings). Wouldn't penalties interfere with a Roth conversion ladder? I would like to ask how you know. Can you point me to the relevant irs.gov page(s)?
I withdrew $10k from my Roth IRA for a down payment on my house under a "first time home buyer" incentive in the tax code that allows up to $10,000 to be withdrawn without penalty as long as it is used toward your first property purchase. Apparently I did my paperwork wrong because I got bitch-slapped with a 10% early withdraw penalty when I filed my taxes that year. All $10,000 came from a sum that was transferred over from a 401k from a previous employer. I paid the taxes on it when I transferred it, then got hit with the early withdraw penalty, then SOMEHOW got hit with ANOTHER early withdraw penalty for my 401k, even though I followed the instructions from the IRS to a T. Consulted a tax professional, they told me it would end up being more expensive to fight it than to just pay the bullshit $1800 in back taxes that I suddenly owed.
#TaxationIsTHEFT

JordanOfGilead

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Re: Relatives who just don't get it
« Reply #3618 on: September 07, 2017, 02:44:33 PM »
He did raid his IRA for the $7k down payment. Someone upthread thought he didn't, so I wanted to clarify.
Ah, damn. That is idiotic. At 0.9% interest I would try to put as little money down as possible, especially if the down payment had to come from retirement accounts. I hope it was at least from a Roth IRA so there aren't penalties?
There's an early withdraw penalty, even for Roth IRAs, if you pull it out before the age of 55 and don't replace it within a certain period of time. Ask me how I know.
I thought the penalty was for withdrawing more than the contributions (investment earnings). Wouldn't penalties interfere with a Roth conversion ladder? I would like to ask how you know. Can you point me to the relevant irs.gov page(s)?

https://www.irs.gov/publications/p590b/ch02.html . There's a handy flow chart if you scroll down.
This is the source I used. I called the IRS and asked if there were any special forms. They said no and instructed me to indicate when I filed my taxes that I used the withdraw for a first time home purchase. I did so. I was penalized. It's horse shit.

RWD

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Re: Relatives who just don't get it
« Reply #3619 on: September 07, 2017, 03:12:52 PM »
He did raid his IRA for the $7k down payment. Someone upthread thought he didn't, so I wanted to clarify.
Ah, damn. That is idiotic. At 0.9% interest I would try to put as little money down as possible, especially if the down payment had to come from retirement accounts. I hope it was at least from a Roth IRA so there aren't penalties?
There's an early withdraw penalty, even for Roth IRAs, if you pull it out before the age of 55 and don't replace it within a certain period of time. Ask me how I know.
I thought the penalty was for withdrawing more than the contributions (investment earnings). Wouldn't penalties interfere with a Roth conversion ladder? I would like to ask how you know. Can you point me to the relevant irs.gov page(s)?
https://www.irs.gov/publications/p590b/ch02.html . There's a handy flow chart if you scroll down.

Looks to me like return of regular contributions is not taxed, emphasis mine:
Quote
Are Distributions Taxable?
You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s).
Quote
Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover contribution that you had to include in income because of the conversion or rollover.

mustachepungoeshere

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Re: Relatives who just don't get it
« Reply #3620 on: September 07, 2017, 08:13:07 PM »
In the words of the great Dan Savage, it's advice, it's not binding arbitration.

Quoting so I'll remember this!

JordanOfGilead

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Re: Relatives who just don't get it
« Reply #3621 on: September 08, 2017, 06:10:08 AM »
He did raid his IRA for the $7k down payment. Someone upthread thought he didn't, so I wanted to clarify.
Ah, damn. That is idiotic. At 0.9% interest I would try to put as little money down as possible, especially if the down payment had to come from retirement accounts. I hope it was at least from a Roth IRA so there aren't penalties?
There's an early withdraw penalty, even for Roth IRAs, if you pull it out before the age of 55 and don't replace it within a certain period of time. Ask me how I know.
I thought the penalty was for withdrawing more than the contributions (investment earnings). Wouldn't penalties interfere with a Roth conversion ladder? I would like to ask how you know. Can you point me to the relevant irs.gov page(s)?
https://www.irs.gov/publications/p590b/ch02.html . There's a handy flow chart if you scroll down.

Looks to me like return of regular contributions is not taxed, emphasis mine:
Quote
Are Distributions Taxable?
You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s).
Quote
Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover contribution that you had to include in income because of the conversion or rollover.
I paid the appropriate taxes when I converted from a 401k to a Roth IRA. Is that not what that means? Because I still got charged those taxes again plus a 10% early withdraw penalty.

RWD

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Re: Relatives who just don't get it
« Reply #3622 on: September 08, 2017, 07:29:26 AM »
https://www.irs.gov/publications/p590b/ch02.html . There's a handy flow chart if you scroll down.

Looks to me like return of regular contributions is not taxed, emphasis mine:
Quote
Are Distributions Taxable?
You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s).
Quote
Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover contribution that you had to include in income because of the conversion or rollover.
I paid the appropriate taxes when I converted from a 401k to a Roth IRA. Is that not what that means? Because I still got charged those taxes again plus a 10% early withdraw penalty.
We are talking about two [slightly] different things here. I'm referring to regular direct contributions to a Roth IRA and then distributions that do not exceed the contribution amounts. Your case was a conversion to Roth IRA and subsequent distribution for first time home buying.

It's hard to speculate (and I'm not a tax professional either), but my guess is that something went wrong with your eligibility as a first time home buyer.
https://www.irs.gov/publications/p590b/ch01.html#en_US_2016_publink1000230922
Quote
First home.   Even if you are under age 59½, you do not have to pay the 10% additional tax on up to $10,000 of distributions you receive to buy, build, or rebuild a first home. To qualify for treatment as a first-time homebuyer distribution, the distribution must meet all the following requirements.
  • It must be used to pay qualified acquisition costs (defined next) before the close of the 120th day after the day you received it.
  • It must be used to pay qualified acquisition costs for the main home of a first-time homebuyer (defined below) who is any of the following.
    • Yourself.
    • Your spouse.
    • Your or your spouse's child.
    • Your or your spouse's grandchild.
    • Your or your spouse's parent or other ancestor.
  • When added to all your prior qualified first-time homebuyer distributions, if any, total qualifying distributions cannot be more than $10,000.

Though it sounds like something still went wrong elsewhere because you should have only been charged taxes once (because Roth is post-tax).

JordanOfGilead

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Re: Relatives who just don't get it
« Reply #3623 on: September 08, 2017, 07:31:38 AM »
https://www.irs.gov/publications/p590b/ch02.html . There's a handy flow chart if you scroll down.

Looks to me like return of regular contributions is not taxed, emphasis mine:
Quote
Are Distributions Taxable?
You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s).
Quote
Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover contribution that you had to include in income because of the conversion or rollover.
I paid the appropriate taxes when I converted from a 401k to a Roth IRA. Is that not what that means? Because I still got charged those taxes again plus a 10% early withdraw penalty.
We are talking about two [slightly] different things here. I'm referring to regular direct contributions to a Roth IRA and then distributions that do not exceed the contribution amounts. Your case was a conversion to Roth IRA and subsequent distribution for first time home buying.

It's hard to speculate (and I'm not a tax professional either), but my guess is that something went wrong with your eligibility as a first time home buyer.
https://www.irs.gov/publications/p590b/ch01.html#en_US_2016_publink1000230922
Quote
First home.   Even if you are under age 59½, you do not have to pay the 10% additional tax on up to $10,000 of distributions you receive to buy, build, or rebuild a first home. To qualify for treatment as a first-time homebuyer distribution, the distribution must meet all the following requirements.
  • It must be used to pay qualified acquisition costs (defined next) before the close of the 120th day after the day you received it.
  • It must be used to pay qualified acquisition costs for the main home of a first-time homebuyer (defined below) who is any of the following.
    • Yourself.
    • Your spouse.
    • Your or your spouse's child.
    • Your or your spouse's grandchild.
    • Your or your spouse's parent or other ancestor.
  • When added to all your prior qualified first-time homebuyer distributions, if any, total qualifying distributions cannot be more than $10,000.

Though it sounds like something still went wrong elsewhere because you should have only been charged taxes once (because Roth is post-tax).
Like I said, I probably overlooked something and got trapped in a loophole. The tax man still bent me over by double-charging me though.

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Gronnie

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Re: Relatives who just don't get it
« Reply #3624 on: September 08, 2017, 11:10:48 AM »
I don't think a conversion is the same thing as a contribution when it comes to withdrawals, but I'm not a tax guy so take that with a very large grain of salt.

MrMoogle

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Re: Relatives who just don't get it
« Reply #3625 on: September 08, 2017, 11:30:22 AM »
I don't think a conversion is the same thing as a contribution when it comes to withdrawals, but I'm not a tax guy so take that with a very large grain of salt.
A contribution to a Roth IRA can be taken out at any time without paying any penalties or taxes, but not the interest on the contribution.  A conversion has to go through the 5 year waiting period, then the conversion can be taken out without paying any penalties or taxes, but not the interest on the conversion.  All interest has to either wait until the year you turn 59.5 or you pay a penalty.

http://www.bankrate.com/investing/ira/roth-ira-5-year-rule-the-tax-free-earnings-clock-starts-ticking-at-different-times/

Ze Stash

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Re: Relatives who just don't get it
« Reply #3626 on: September 08, 2017, 01:04:10 PM »
Sadly I have to nominate my FIL as someone who "doesn't get it" as well.

3 months ago he financed a new Seat Alhambra with all the nick nacks you could think of. My SIL and GF already moved out, so this is a 7-seater for only my FIL and MIL (who has her own car). He says he needs the space for their two yearly ski trips. As he also uses it for his business and can write it off as a business expense and save some taxes I was kind of whatever, he could've done worse.

Turns out that he didn't really pay attention at the dealership and the salesman included a credit insurance policy in the financing deal bc my FIL has poor credit (go figure). After 3 months he noticed that the monthly amounts deducted from his bank account were significantly larger than expected, found the insurance policy in his papers and calculated that in total it will cost him an additional 10k € over the life of the loan. He got very pissed, tried getting a lawyer involved, went to the dealership to complain, but in the end he signed the papers and didn't pay attention so it is his fault.

Now to the interesting part. After all this his solution to the problem was to trade in the car, buy out the insurance policy and finance a used Mercedes C-Class, which is even bigger, without a credit insurance policy instead. The Mercedes dealership will take his Seat for 5k € less than he paid for it three months ago, he will have to pay 2k € to close the credit insurance and the monthly payment on the Mercedes is on par with the Seat payment WITH the insurance policy. He is now out 7k € for three months of driving and still has a monthly payment that is higher than he originally wanted but still very happy with all of this bc he finally got the car he really wanted.

His conclusion: you shouldn't get cars that are compromises but go for what you really want instead, bc in the end they cost the same anyway (?!?!).

I really like him. He's honest, hard working and overall just a really good guy. But man he has no clue about finances.
« Last Edit: September 08, 2017, 01:50:15 PM by Ze Stash »

Gronnie

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Re: Relatives who just don't get it
« Reply #3627 on: September 08, 2017, 01:18:41 PM »
I don't think a conversion is the same thing as a contribution when it comes to withdrawals, but I'm not a tax guy so take that with a very large grain of salt.
A contribution to a Roth IRA can be taken out at any time without paying any penalties or taxes, but not the interest on the contribution.  A conversion has to go through the 5 year waiting period, then the conversion can be taken out without paying any penalties or taxes, but not the interest on the conversion.  All interest has to either wait until the year you turn 59.5 or you pay a penalty.

http://www.bankrate.com/investing/ira/roth-ira-5-year-rule-the-tax-free-earnings-clock-starts-ticking-at-different-times/

Yes, this was my understanding as well. Conversion is subject to 5 year waiting period, no waiting period on contribution. Any gains are always subject to penalty.

martyconlonontherun

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Re: Relatives who just don't get it
« Reply #3628 on: September 08, 2017, 01:34:33 PM »
Did a running event/camping trip with friends of friends in northern michigan. A woman "in charge" collected money from everyone and i instantly paid in cash. (It was $150 but basically twice what i expected.) After doing the calculations in my head on the way back, the math was off. I facebooked message afterwards that something seems off but let me know if I missed any expenses since Xx10 people should way more than cover expenses A-D. She apologized and said she thinks she screwed up the calculations and would venmo us back. After a month I didn't hear anything and asked for an update. She said she would send it when she got paid on the 8th (today), turns out she didn't have enough money and said she would pay the other half the 22nd because "Utah payroll is bizarre".

I don't think she is screwing us over based on her personality and past stories, but it just shocks me someone can be so screwed up with finances that they can't afford to reimburse people. This isn't a bill for something she just got, it was money accidentally given to her and she has such cash flow probelms it disappeared in the interim. At this point she owes  only like $20 each to 5 people. I don't really care but some people are getting super pissed and these friends are closer to her than me. I just responded with a "Sounds great. Thanks and keep me posted" cause she has a lot more problems than my $20.

JordanOfGilead

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Re: Relatives who just don't get it
« Reply #3629 on: September 11, 2017, 06:01:13 AM »
I don't think a conversion is the same thing as a contribution when it comes to withdrawals, but I'm not a tax guy so take that with a very large grain of salt.
A contribution to a Roth IRA can be taken out at any time without paying any penalties or taxes, but not the interest on the contribution.  A conversion has to go through the 5 year waiting period, then the conversion can be taken out without paying any penalties or taxes, but not the interest on the conversion.  All interest has to either wait until the year you turn 59.5 or you pay a penalty.

http://www.bankrate.com/investing/ira/roth-ira-5-year-rule-the-tax-free-earnings-clock-starts-ticking-at-different-times/
That would be the thing I overlooked.
It would also be exactly where the IRS fucked me when I asked "and I can take this out right away after the transfer goes through with no penalty, right?" and they said "yes."

Oh well, live and learn.

paddedhat

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Re: Relatives who just don't get it
« Reply #3630 on: September 11, 2017, 08:45:13 AM »

That would be the thing I overlooked.
It would also be exactly where the IRS fucked me when I asked "and I can take this out right away after the transfer goes through with no penalty, right?" and they said "yes."

Oh well, live and learn.

We have a lawyer friend who does estate and estate tax law. If she is facing a questionable section of IRS rules she will call them directly, with the same question, up to three times. She documents everything about the conversations, including who she spoke to. She hopes for agreement by at least two of the three advisors. This gives her the ability to deal with an audit with, " I spoke to your people on  x and x, and was given the following guidance, which I complied with. Now you are saying that TWO of your experts are wrong?".

JordanOfGilead

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Re: Relatives who just don't get it
« Reply #3631 on: September 13, 2017, 09:16:07 AM »

That would be the thing I overlooked.
It would also be exactly where the IRS fucked me when I asked "and I can take this out right away after the transfer goes through with no penalty, right?" and they said "yes."

Oh well, live and learn.

We have a lawyer friend who does estate and estate tax law. If she is facing a questionable section of IRS rules she will call them directly, with the same question, up to three times. She documents everything about the conversations, including who she spoke to. She hopes for agreement by at least two of the three advisors. This gives her the ability to deal with an audit with, " I spoke to your people on  x and x, and was given the following guidance, which I complied with. Now you are saying that TWO of your experts are wrong?".
Sounds like good advice. I'll have to do that in the future.

Linda_Norway

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Re: Relatives who just don't get it
« Reply #3632 on: September 18, 2017, 05:40:47 AM »
Sadly I have to nominate my FIL as someone who "doesn't get it" as well.

3 months ago he financed a new Seat Alhambra with all the nick nacks you could think of. My SIL and GF already moved out, so this is a 7-seater for only my FIL and MIL (who has her own car). He says he needs the space for their two yearly ski trips. As he also uses it for his business and can write it off as a business expense and save some taxes I was kind of whatever, he could've done worse.

Turns out that he didn't really pay attention at the dealership and the salesman included a credit insurance policy in the financing deal bc my FIL has poor credit (go figure). After 3 months he noticed that the monthly amounts deducted from his bank account were significantly larger than expected, found the insurance policy in his papers and calculated that in total it will cost him an additional 10k € over the life of the loan. He got very pissed, tried getting a lawyer involved, went to the dealership to complain, but in the end he signed the papers and didn't pay attention so it is his fault.

Now to the interesting part. After all this his solution to the problem was to trade in the car, buy out the insurance policy and finance a used Mercedes C-Class, which is even bigger, without a credit insurance policy instead. The Mercedes dealership will take his Seat for 5k € less than he paid for it three months ago, he will have to pay 2k € to close the credit insurance and the monthly payment on the Mercedes is on par with the Seat payment WITH the insurance policy. He is now out 7k € for three months of driving and still has a monthly payment that is higher than he originally wanted but still very happy with all of this bc he finally got the car he really wanted.

His conclusion: you shouldn't get cars that are compromises but go for what you really want instead, bc in the end they cost the same anyway (?!?!).

I really like him. He's honest, hard working and overall just a really good guy. But man he has no clue about finances.

Oh dear. All this financing and tax reductions are things you really have to understand well before you make a deal. Car dealers just want to make a deal and they will always make transactions sound attractive to you. Next time, tell you FIL that you or your OH can join him buying a car to help him get the whole financial picture.

martyconlonontherun

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Re: Relatives who just don't get it
« Reply #3633 on: September 18, 2017, 07:38:14 PM »
I have a bachelor party that is 5.5 hours away next month. There are four of us from the same city and I offered to drive. One guy says SW has a great deal! $135! Well its also $177 coming back. So it would be $315 a person (or $1250 a carload) to fly to the city that would take 3 hours to get to when you include parking at the airport, checking in, baggage claim, and then 25 min downtown from the airport in either an uber or rental. It did not make sense to me at all.

Dicey

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Re: Relatives who just don't get it
« Reply #3634 on: September 19, 2017, 03:04:27 AM »
My problem with all this is that I’m taking it a bit too personally...I'm looking at my 1998 Camry sitting in the garage and thinking I’ll never have as nice a car as DS does now.
Solution: Save your money and plan on buying it from him with cash at fair (depreciated) market value when he tires of it. This will give you something to look forward to. I'm assuming you would be able to pay cash for it now, but it will be more fun if you start a new-to-you car fund and watch it grow.
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dandarc

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Re: Relatives who just don't get it
« Reply #3635 on: September 19, 2017, 07:31:45 AM »
I have a bachelor party that is 5.5 hours away next month. There are four of us from the same city and I offered to drive. One guy says SW has a great deal! $135! Well its also $177 coming back. So it would be $315 a person (or $1250 a carload) to fly to the city that would take 3 hours to get to when you include parking at the airport, checking in, baggage claim, and then 25 min downtown from the airport in either an uber or rental. It did not make sense to me at all.
Probably cheaper to drive even if they don't pitch in for gas or anything.
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TomTX

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Re: Relatives who just don't get it
« Reply #3636 on: September 19, 2017, 11:06:15 AM »
"...AT LEAST 5%"

The more emphatically I imagine these two geezers saying AT LEAST, the funnier it is. It's like, WASH YOUR HAIR AT LEAST ONCE A MONTH! WHETHER IT NEEDS IT OR NOT!
Always watch the sunset, at least once per day.
. Those orbital rocket rides are a bit out of my price range foe those multiple sunsets....
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TomTX

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Re: Relatives who just don't get it
« Reply #3637 on: September 19, 2017, 11:12:54 AM »

Would someone like this (or anyone, really) keep a car for 20 years? Think of where electric cars and automation will be in 20 years. It'll be all too easy to say, "But all the gas and time savings! Why should I keep this outdated gas guzzler?"

It's hard to say for sure but I could see this happening. Maybe he'll keep it at least 10 years though, that's not unreasonable for a brand new car even if you drive a lot of miles. But maybe he'll keep it even less since he's going to grad school and might be making bank in a few years? Hedonic threadmill and all...

Ohhh, that is a good point--I was about to say of course people keep their cars for 20 years, even non-mustachian people, but electric and self driving cars will likely throw a wrench in that for a few years.
Yes, those are two trends each with the possibility of causing major disruption in the automotive industry and market. Probably within 5 years.

Think about how Uber, etc have disrupted taxis.

Autonomous capabilities have the potential to cut costs 75% by eliminating the driver.

EVs have the potential to cut TCO by 50% once you include the lower maintenance, much lower fuel cost and expected longer power train lifespan (not today, it's still early. But in 5 years under current trends)

Both of these effects are complementary, so you could see on-demand transportation costs go down a LOT.
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Gronnie

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Re: Relatives who just don't get it
« Reply #3638 on: September 19, 2017, 06:13:08 PM »
I have a bachelor party that is 5.5 hours away next month. There are four of us from the same city and I offered to drive. One guy says SW has a great deal! $135! Well its also $177 coming back. So it would be $315 a person (or $1250 a carload) to fly to the city that would take 3 hours to get to when you include parking at the airport, checking in, baggage claim, and then 25 min downtown from the airport in either an uber or rental. It did not make sense to me at all.
Probably cheaper to drive even if they don't pitch in for gas or anything.

Plus then you will have a car at your destination.

MgoSam

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Re: Relatives who just don't get it
« Reply #3639 on: September 19, 2017, 08:26:49 PM »
I have a bachelor party that is 5.5 hours away next month. There are four of us from the same city and I offered to drive. One guy says SW has a great deal! $135! Well its also $177 coming back. So it would be $315 a person (or $1250 a carload) to fly to the city that would take 3 hours to get to when you include parking at the airport, checking in, baggage claim, and then 25 min downtown from the airport in either an uber or rental. It did not make sense to me at all.
Probably cheaper to drive even if they don't pitch in for gas or anything.

Plus then you will have a car at your destination.

And you can listen to a decent audiobook during the 11 hours of the drive.