Question re: LTT in Roth IRA

[foglifter]

So my question is:
Can I sell the LTTs within my Roth IRA without encountering a penalty? I would be replacing them immediately.

What penalty do you mean?

[6 Iron]

mdsw,

Selling an asset will not remove it from your Roth, and would not be treated as a withdrawal. The cash from the sale would remain in the Roth, and then can be reinvested, much like the interest you would earn on your bonds if you left them there.

[foglifter]

mdsw,

Selling an asset will not remove it from your Roth, and would not be treated as a withdrawal. The cash from the sale would remain in the Roth, and then can be reinvested, much like the interest you would earn on your bonds if you left them there.

Thank you very much.

The next question is then, should the cash remain in the Roth, how does one re-balance if, say, bonds are in a roth, stocks/cash are in a pension fund (where you can't put anything in, you can only take out), and gold is in etf/physical bullion.

For wouldn't one have to, at some time, put money into the stocks/cash (which one cannot do as they are in the pension fund), OR take money out of the Roth (which one cannot do without a penalty)?

Seems complicated, but I have a feeling it's quite simple. 

First of all, unlike Traditional IRA you CAN withdraw your contributions from ROth IRA at anytime without paying taxes or penalties. The penalty only applies to earnings - capital gain, interest, and dividends paid by the securities in your Roth.

As to rebalancing, if you are in accumulation phase you should do all rebalancing by adding new money to a lagging asset. In retirement the rule of thumb is to withdraw from Roth as late as possible, with traditional IRA and 401(k) being the first in line to withdraw from.

If you really need to take money from Roth it's OK, just make sure the amount you withdraw doesn't exceed the total amount of contributions to the account. The downside of withdrawing form Roth IRA is the fact that you won't be able to replenish your account with what you withdrew. You can only make new contributions as per IRS limits (5/6K per year).

[foglifter]

Do I understand correctly that your parents have no income from wages and hence there is no new money added to Roth? If so, you can do all the rebalancing in the Roth - for example, if you need to add money to stocks you can use dividends from bond to buy stock fund in IRA. If more money should be put to stocks than available in bond income you can sell some bonds and buy stocks. Obviously, over long-term the stocks portion in the pension plan will grow faster than bonds in IRA so you probably want to withdraw more form the pension plan.

I'm in accumulation phase and won't have pension so I'm not the best person to get advise from. Perhaps others could chip in with their recommendations.

[KevinW]

Do they really have exactly 50% in the pension, 25% in the Roth, and 25% in taxable? That precise breakdown seems unlikely.

[KevinW]

I'm not sure why this breakdown seems unlikely...  ?

Well, since you're saying you'd open two Roths to create $10k space, that would mean that their pension currently has exactly $20,000.00 in it, not a penny more or less. That seems unlikely.

[foglifter]

I don't think Joint Roth IRAs exist... "I" means "Individual".

[KevinW]

foglifter is correct, I stands for Individual and every Roth must be owned by one and only one individual. However nothing stops you from opening two IRA accounts but managing them as if they all belong to the same portfolio.

So to be clear, there is $110k of pension assets and $10k of soon-to-be-Roth assets, right? Do you want to have a $20k PP with $90k in something else, or do you want to put everything into a $120k PP?