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URL:  http://boards.fool.com/warning-this-ended-up-longer-than-i-thought--11029897.aspx

Subject:  Re: 401(k) to IRA rollover question Date:  7/9/1999  11:35 AM
Author:  PJGeorge Number:  11858 of 78166

Warning, this ended up longer than I thought. :-}

<<Secondly, it was suggested to me to later convert that transferred money to a Roth IRA. Is that
something that should be considered?

Always worth considering, but it's your decision. Some factors to consider:>>

I am considering this because I am changing jobs soon, too. I have about 73K in my 401(k) and I am 31 years old. I make 80K a year, w/ a wife, 2 kids and mortgage. That puts me in the 28% tax bracket.

So is this right?: If I roll my 401(k) into a traditional IRA, and then into a Roth IRA I pay taxes on the full 73K like it was income?? If so, that'll put me in the 33% tax bracket and I'll only have about 49K to put in my Roth IRA.

Now the question I have is: Will this be better in the long run since I can make widthdrawals from the Roth tax free when I retire? Or will the lost base principle outwiegh the future tax benefits? Okay, wait, I know how to use Excel....

Okay, this is what I did:

Traditional IRA
Principle: 73K
Rate: 11%
Duration: 25 Years (300 Months) - retire @ 56
Future Value: $1,127,695

vs.

Roth IRA
Principle: 49K
Rate: 11%
Duration: 25 Years (300 Months) - retire @ 56
Future Value: $756,946

Now, assuming I take equal widthdrawals for the next 30 years and pay 15% or 28% tax on the Traditional IRA and 0% tax on the Roth I get:

Traditional IRA: $31,951(15% Tax Bracket) or $27,064(28% Tax Bracket)
Roth IRA : $25,231

So it would seem to me that I answered my own question. It would be better to keep the traditional IRA and pay the taxes when I retire.


Now, If I wanted AL