packrat44
Thinks s/he gets paid by the post
What are your thoughts about converting all/majority of a person's Tradional IRA over to a ROTH IRA if you expect to be in a higher tax bracket in future years?
Under the current IRS tax rates I believe that conversion to a Roth can be quite beneficial to many folks that have other funds available to pay the federal income taxes that will come due because of the conversion. If you believe, as I do, that there is very little chance that rates will be decreased in the future and a great chance that they will be increased in the future, conversion should definitely be considered.
I think this is an excellent opportunity to search the old threads for keywords "Roth" and "conversion"...What are your thoughts about converting all/majority of a person's Tradional IRA over to a ROTH IRA if you expect to be in a higher tax bracket in future years?
The 'trick' is to convert only enough to keep from moving you too far into a higher bracket than you think you will be in in the future.
I'm in the same camp as most of the others. I think the odds that taxes will be lowered in the future is slim.
-ERD50
My real concern is EVERYONE is touting the beauty and perfection of the Roth, but my sixth sense tells me our gov'ment is up to something by encouraging us to convert and pay all this tax money now for its immediate needs. I feel that in all probability they'll change the rules on the tax free withdrawl in the future. Once you've paid the tax upfront (at conversion), its gone, forever !!
A couple of questions:
Q. 1)What would be the tax implications of leaving your spouse or children with 1 million dollars in a Roth versus a traditional IRA after your death.
A. If you had an estate that exceeded the exclusion limit at time of death, the Roth would be better because it lowers the face value of the transfer. Effectively passing more money to your heirs.
Q. 2)Which is better, converting a million dollar traditional IRA to a Roth in 2007 and letting grow for 20 years @8% versus a million dollars in a traditional IRA and letter grow @8% taxdeferred for 20 years and then w/d 4% for "x" years.
A. I do not know of anyone who would advocate converting $1M in one year. Usually you would cap your conversion at the highest tax bracket you expect to be in when withdrawals are made.
I do not want to be forced into a manditory withdrawal at 70 1/2 which is a time when a major investment will likely be liquidated. (I will have no control over the sale.) This liquidation would result in being in the highest tax bracket.
It is my intent to let the ROTH IRAs ride untouched to be used only in an emergency, then passed to heirs at time of death.
Q. My real concern is EVERYONE is touting the beauty and perfection of the Roth, but my sixth sense tells me our gov'ment is up to something by encouraging us to convert and pay all this tax money now for its immediate needs. I feel that in all probability they'll change the rules on the tax free withdrawl in the future. Once you've paid the tax upfront (at conversion), its gone, forever !!
my sixth sense tells me our gov'ment is up to something by encouraging us to convert and pay all this tax money now
...we do not know for sure what the government will do in regarding taxation. The same goes with not being able to accurately forecast the market. We have to make the best choice after weighing what information we have.
Since we don't know what the future holds for the market, it makes sense to diversify our investments. That same reasoning holds true for the future of taxation and it makes sense to diversify retirement tax instruments as well. For that reason I have (or had) a combination of 401k's, TIRA's, Roth IRA's, after tax savings, etc.
Nothing that hasn't already been [-]beaten to death[/-] extensively analyzed on other threads containing the keywords "Roth" and "conversion"...Anyone else have ideas on this subject?
If one is working and is eligible for the 401k or 403b at work, then one cannot really use a traditional IRA unless one's income is low. If that's the case, then the Roth is a better deal anyways since anyone with low income is in a low marginal income tax bracket.So should all the young folks (just starting work) not even bother with Traditional IRA's and just put their retirement funds in Roth's?
My son and daughter are putting the maximum in their ROTH accounts (along with their TSP and 403(b)). Nothing goes to a traditional IRA.
You do not pay any penalties for a conversion.On the conversions from the traditionals to the Roth are you paying a penalty as well as the tax for the early withdrawl prior to age 59 1/2?
What are your thoughts about converting all/majority of a person's Tradional IRA over to a ROTH IRA if you expect to be in a higher tax bracket in future years?
Do you plan to leave any portion as an inheritance? If so, gifting that with the step up in basis rule would be where you could use tIRA funds and not bother to convert.
Do you plan to leave any portion as an inheritance? If so, gifting that with the step up in basis rule would be where you could use tIRA funds and not bother to convert.