Most financial planners say to convert IRA to Roth, but what is the actual benefit? I have a "simple math" comparison for consideration:
Common assumptions for a simplistic scenario:
Retired, no income, living off of investments only.
Won't be collecting SS for several years.
24% tax bracket (throttling expenditures to keep it no higher).
$100k starting amount.
10% return, compounding interest.
Access all monies at end of 10 years.
Scenario:
IRA money: year one $110K, ten years $259,397
$259,397@ 24% tax bracket leaves $197,124 after tax
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Roth money: year one $76K, ten years $197,124 after tax
------
So where's the big advantage? Perhaps planning on tax rates going up in the future? What if they go down? What if I can lower expenditures in the future putting me in a lower tax bracket, then the "non Roth" scenario would actually have more after-tax money in 10 years.
I'm just trying to better understand why so many "smart people" say I should be doing it! Looking for some insight from y'all!
Common assumptions for a simplistic scenario:
Retired, no income, living off of investments only.
Won't be collecting SS for several years.
24% tax bracket (throttling expenditures to keep it no higher).
$100k starting amount.
10% return, compounding interest.
Access all monies at end of 10 years.
Scenario:
IRA money: year one $110K, ten years $259,397
$259,397@ 24% tax bracket leaves $197,124 after tax
------
Roth money: year one $76K, ten years $197,124 after tax
------
So where's the big advantage? Perhaps planning on tax rates going up in the future? What if they go down? What if I can lower expenditures in the future putting me in a lower tax bracket, then the "non Roth" scenario would actually have more after-tax money in 10 years.
I'm just trying to better understand why so many "smart people" say I should be doing it! Looking for some insight from y'all!