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put (small) income into Roth or spend it ?
Old 03-12-2007, 01:21 PM   #1
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put (small) income into Roth or spend it ?


I think I know the answer to this question, but would appreciate
insight here.

I am RE'ed, but occasionally have the opportunity to make a little
money (perhaps $5-10K) doing a consulting job. When this occurs,
I have compensation income and can therefore put up to $5K (or
whatever I earn, if less) into a Roth. Clearly it makes sense to
do this, rather then spending the money for expenses, right ?
The only other possiblity would be a deductible TIRA contribution,
but since my tax rate should be quite low, that is probably silly.
But contributing to neither makes no sense whatsoever (?).

On a similar note, in deciding whether to do $5K worth of consulting
(or not, and goof off more), doesn't it make sense to consider that
this $5K is worth a lot more to me than any other $5K, because it'll
allow a Roth contribution that otherwise couldn't happen (because
no "compensation income") and thus the growth/earnings of this
$5K will be tax-free in perpetuity ? Put another way, by choosing to
do the work and earn the $5K, I'm effectively increasing my portfolio
value (this year) by $5K *and* it's the more-valuable Roth portion of
my portfolio (relative to what my portfolio would be worth if I did no
work and had to pull $5K more out of it for expenses).

Hope this makes sense, thanks !

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Re: put (small) income into Roth or spend it ?
Old 03-12-2007, 01:25 PM   #2
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Re: put (small) income into Roth or spend it ?

I would invest it into the Roth.

At the very least, remember the lost opportunity cost for every dollar not invested...
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Re: put (small) income into Roth or spend it ?
Old 03-12-2007, 02:15 PM   #3
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Re: put (small) income into Roth or spend it ?

Quote:
Originally Posted by RustyShackleford
...I have compensation income and can therefore put up to $5K (or
whatever I earn, if less) into a Roth. Clearly it makes sense to
do this, rather then spending the money for expenses, right ?...
Right.
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Re: put (small) income into Roth or spend it ?
Old 03-13-2007, 10:51 AM   #4
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Re: put (small) income into Roth or spend it ?

Quote:
Originally Posted by Peaceful_Warrior
I would invest it into the Roth.

At the very least, remember the lost opportunity cost for every dollar not invested...
Yep, that's my thought on it, too. IF I take on any pt w*rk after ER, I plan to stick the first 5K in my ROTH, because if I don't it really is 'lost opportunity'!!!
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