Comments on: Roth IRA Conversion

By: Douglas Wilson

Douglas Wilson — Wed, 28 Jul 2010 15:49:11 +0000

There is nothing to consider before converting to a Roth IRA. I thought there were certain things to assess before converting just like everyone else; but after I read The Gospel of Roth by John Bledsoe, it was clear that I should convert. The book completely contradicts what I had been reading off every news site and explains how converting as soon as you can is the best option. Because you don’t have to decide whether you want to keep it as a Roth IRA or convert it back to a regular IRA until October 17th, 2011, converting now is like having a free look at the future. If it proves better to convert, then you already converted. If you should have left it as an IRA to save taxes, then convert it back free of penalty. The Gospel of Roth is easy to read and straight forward, and practically made my decision for me.

By: Ryan

Ryan — Fri, 18 Jun 2010 14:59:15 +0000

Dima, you’re right. No one knows what will happen in the future in regard to taxes. I would hate to be the Congressman/woman who recommends changing the taxability or Roth IRA distributions though – they are almost seen as sacred!

Many financial planners recommend have tax diversification in your investment portfolio, which for many people would mean using Roth IRAs and a traditional 401k, but there are many other ways to go about getting a tax diversified retirement portfolio.

By: dima

dima — Fri, 18 Jun 2010 14:55:43 +0000

It is a good point, however, the problem is that there is no guarantee that the tax laws won’t be rewritten to go ahead and tax Roth IRA distributions at some point in the future (yet another way to make up for government spending), just look at the changes to HSAs that are being forced on everyone starting next year. Will it happen? Nobody knows, but you might get double taxed at some point, so it still might be vise to have both, the Roth and Traditional IRA/401ks…

By: Ryan

Ryan — Fri, 18 Jun 2010 11:40:47 +0000

Absolutely! I have no idea where are taxes will be in 5 years, let alone the 30 before I will be eligible to withdraw my my IRAs!

By: Ryan

Ryan — Fri, 18 Jun 2010 11:39:15 +0000

It depends, Doug. Many people also have 401k plans, Traditional IRAs, or similar retirement plans that are taxed upon withdrawal (403b, 457b, Thrift Savings Plan, and a host of self-employed retirement plans).

I also know retirees who continue earning money after they “retire,” from things such as real estate rental, dividends, consulting, freelance work, etc.

This is a situation where it is probably a good idea to sit down with a financial planner and/or tax professional to look at your total financial picture, and what you think it may be in the future – knowing full well the future is unpredictable!

By: basicmoneytips

basicmoneytips — Fri, 18 Jun 2010 11:08:26 +0000

If at all possible, you should probably go for a ROTH IRA conversion. As expected, with all the spending the government is doing and the debt the government is running up, there is no way taxes are going down – its just not possible. What is happening in Europe is a foreshadowing of what is going to happen here. To put your money in a tax free account is a smart move in my opinion.

By: Doug Warshauer

Doug Warshauer — Fri, 18 Jun 2010 02:36:24 +0000

@myfinancialobjectives and Ryan,

While you hope to be in a higher tax bracket by the time you retire, AFTER you retire won’t you drop down to a lower tax bracket?

After you retire your only income would be your annual distribution from your IRA, plus your Social Security benefits and taxes on any investment income in taxable accounts. Seems like this would probably be less taxable income than you have while you’re working.

Does this line of thinking make sense, or am I missing something?

By: myfinancialobjectives

myfinancialobjectives — Wed, 16 Jun 2010 22:40:48 +0000

hmm, makes me think I should convert! I hope to be in a higher tax bracket by the time I retire, but there’s the thing, you can never be sure!

I guess considering I JUST started my IRA, I could easily convert to a Roth IRA, I may mention this to my broker. I read about this a few months back, they seemed attractive then, and even more now considering I actually have an IRA now…