Join Early Retirement Today
Thread Tools Search this Thread Display Modes
To Roth or not to Roth
Old 02-06-2007, 09:04 PM   #1
Thinks s/he gets paid by the post
Helen's Avatar
Join Date: Oct 2004
Location: Portland
Posts: 1,552
To Roth or not to Roth

My plan is to retire in six years at age 56. I will defer my pension until age 60 to avoid a 30% reduction. I will live off my I Bonds for the first four years of retirement. This means my tax rate will be close to 0% during those four years.

My plan is to convert 401k money to a Roth IRA each of the four years up to the 10 - 15% tax bracket.

I am currently funding my Roth (including the catchup), purchasing a chunk of I Bonds and funding $15,500 into my 401k. I can't really afford to put the extra $5,000 in catch up contributions into my 401k, but I would love to for the tax deduction.

Maybe I shouldn't be funding my Roth, but instead max out the 401k to $20,500. Then when I retire convert the 401k to the Roth. I could get the tax deduction now, then move the money when I'm in a really low tax bracket. I am currently in the 28% bracket on the Federal level and 9% State.

Can anyone see a reason why I shouldn't do this ?

Also, if I understand this correctly, I don't need an earned income to do a conversion to a Roth - is this correct ?

Thanks for any help,


Helen is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: To Roth or not to Roth
Old 02-06-2007, 09:08 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jun 2005
Posts: 9,839
Re: To Roth or not to Roth

I agree that you should save 37% on taxes now and pay 0% on taxes in the future. You do not need earned income to do conversions.

LOL! is offline   Reply With Quote
Re: To Roth or not to Roth
Old 02-06-2007, 09:08 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: To Roth or not to Roth

It'd be bad if the tax code is changed before you start withdrawing from the current system to a flat tax or national sales tax.

We stopped contributing to the regular IRA and started on the Roths a few years ago. By the time we "get there" we'll have roughly half and half.

Seems like a good idea unless you're sure the current tiered income tax system is in it for the long haul.
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: To Roth or not to Roth
Old 02-07-2007, 12:00 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: May 2005
Posts: 15,326
Re: To Roth or not to Roth

They have been talking about a flat tax or national sales tax since I started doing taxes back in 1981.... and they are not any closer now than then...

The current tax system allows the gvmt to dole out tax breaks to their friends... and BOTH parties want to be able to do that to get more votes... going to the flat or sales, bye bye favortism...

I don't plan for that to happen... and don't think it will in my lifetime.... and I am still 'young'...
Texas Proud is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Roth Conversion Tax halo FIRE and Money 35 11-28-2006 01:00 PM
Roth IRA & Timber Rights/Tree Farm terminator FIRE and Money 6 07-16-2006 04:09 PM
Not eligible for Roth IRA - conversion? Lusitan FIRE and Money 9 02-23-2006 11:00 AM
Roth 401k - Coming January 2006 Roth401k Other topics 12 06-16-2005 05:59 PM
Tax Deferred to Roth Strategy mccl FIRE and Money 10 06-09-2004 12:08 PM

» Quick Links

All times are GMT -6. The time now is 03:48 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.