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Old 04-10-2012, 02:51 PM   #21
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I would not convert because the taxes would be too high.

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Old 04-10-2012, 03:58 PM   #22
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Unless we plan to spend retirement in poverty, given the fiscal pickle that the country is in I think most of us are likely best off paying some tax now and getting it done-at least down to a modest TIRA balance. It would be hard to paint Roth accounts as a millionaire trick, since high earners have been declared ineligible to participate.

Another thing, one can conceptualize a conversion in which you pay the conversion tax from your taxable account as a transfer of fully taxable portfolio money to Roth money. One would then have these balance sheet changes: y-x in TIRA, where Y was pre-conversion balance, and x is conversion amount; z+x in Roth, where z is pre-conversion amount, and S-a*x, where S is initial taxable balance, and a is marginal tax rate of all taxing authorities applied to transfer. So the total amount of tax deferred or tax free stays the same, just a shift from deferred to free, while the fully taxable account balance is decreased by the amount of the tax.

If one trades at all, the Roth balances should grow faster due to the tax drag on the taxable account.


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