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Old 09-25-2009, 12:46 AM   #21
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I guess a question worth considering is whether it is worth it to bump up to the next bracket (25% - 28%) and convert more, based on what the RMDs will do to you in the future. I just ran a pseudo RMD calculation based on a $2M IRA when I'm 70, and I'd be looking at ~$80K/year. I suspect that would bump me up a notch or two on our probably higher than current brackets. I'm assuming I won't need to be withdrawing from my existing IRA meanwhile, and I've got 18 years before RMDs kick in. The balance should have hopefully quadrupled by then (rule of 72 at 7%).

I also wasn't able to find out whether this no AGI limitation thing is a one time deal in 2010, or if it will continue on forward until somebody changes it again. This could also make a difference since even though a huge conversion now will cost me a ton at 35%, it might be chump change compared to bumping brackets in the 45% future. No way to tell what will happen, but I like to plan for the worst.
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Old 09-25-2009, 07:06 AM   #22
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There is a detailed thread over at bogleheads that cover all the details. It also includes a link to an WSJ article that you must read if you're planning to convert.

Bogleheads :: View topic - Roth IRA conversion
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Old 09-25-2009, 07:20 AM   #23
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Another big plus with the Roth is the inheritance factor for a beneficiary.
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Old 09-25-2009, 07:39 AM   #24
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Originally Posted by harley View Post
I also wasn't able to find out whether this no AGI limitation thing is a one time deal in 2010, or if it will continue on forward until somebody changes it again. .
It's the latter, but who knows when it will be changed again.
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Old 09-27-2009, 02:59 PM   #25
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For 2010 ONLY you may convert to a Roth and the converted amount does not have to be declared as income for 2010. You may report half as income for tax year 2011 and the rest in 2012. Or all in 2010.
I saw something today on fairmark.com (for married folks only) that each spouse has an election to either declare as 2010 income or split into 2011/2012 and the elections can be different so possible to split into 3 yrs.
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Old 09-27-2009, 07:07 PM   #26
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Has anyone seen a constitutional amendment indicating that Roth's will never be taxed? short of that, anything can happen with future taxation rules. If the need is great enough I'm sure the govmint will figure out a way to tax Roths also. Personally, I'd rather avoid paying taxes on my IRAs now, (I'm 59) when (if) I get to 70 1/2 who knows what the world will look like and what my IRA balance will be.

I sure would hate to pay a ton of taxes now or over the next few years just to have the value of my investments pull another March 2009 stunt for a long time afterwards.
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Old 09-27-2009, 10:45 PM   #27
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[QUOTE=ejman;859715]Has anyone seen a constitutional amendment indicating that Roth's will never be taxed? short of that, anything can happen with future taxation rules. If the need is great enough I'm sure the govmint will figure out a way to tax Roths also. Personally, I'd rather avoid paying taxes on my IRAs now, (I'm 59) when (if) I get to 70 1/2 who knows what the world will look like and what my IRA balance will be./QUOTE]

In as much as politicians tend to prefer to be reelected, I doubt very much they would start to tax Roths without grandfathering in existing balances. I would not in the least be surprised if they find some way to add a tax on withdrawals on future contributions, though. Although, if you think about it, they should prefer Roths, since the money is taxed up front, and they (pols) tend to shortsightedness.
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Old 09-28-2009, 07:27 AM   #28
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In as much as politicians tend to prefer to be reelected, I doubt very much they would start to tax Roths without grandfathering in existing balances. I would not in the least be surprised if they find some way to add a tax on withdrawals on future contributions, though. Although, if you think about it, they should prefer Roths, since the money is taxed up front, and they (pols) tend to shortsightedness.
They will not tax roths directly, but they will do it indirectly. Like add Roth
withdrawals into calculation of whether your social security should be taxed.
Likewise, they won't cut social security, they will just increase the
percentages taxed. The taxes will be stealthy and small.
Remember if they announce they will taxed Roth
withdrawals, most people would be able to take it out before the president
had a chance to sign it.
TJ
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