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Subject:  Re: Roth/Traditional or neither ? Date:  8/2/1999  7:27 AM
Author:  TMFPixy Number:  12691 of 88772

Greetings, Rom, and welcome. You wrote:

<<I'm fifty and have only resently started to invest outside of my company's 401K. I'm guessing that I'd like to retire in about 5 years. My 401K is currently just under $500,000 and my current lump sum pension is a little over $300,000.

I got into the F4 and a couple of RMs a couple of months ago (~30K) in a fully taxable online account. Now I'm wondering if I should also open an IRA. Apparently I'll need an account evenually to transfer my 401K/Lump Sum (?), but does it make sense for me to open one and contribute to it now ? And if so, is the ROTH more for long term younger investors and I should take the 'now' tax advantages of the traditional IRA ? >>

You participate in two qualified retirement plans through work. Therefore, your contributions to an IRA will probably not be deductible for income tax purposes based on your filing status and adjusted gross income. For details on these limits, see our IRA area at A $2K nondeductible contribution to a Roth IRA will compound tax deferred and ultimately allow totally tax free withdrawals. A $2K nondeductible contribution to a traditional IRA will also compound tax deferred, but on withdrawal all earnings get taxed at ordinary income tax rates. Hence, for nondeductible contributions a Roth IRA is the better vehicle. In fact, because gains in a Roth IRA don't get taxed, IMHO that's the first place money should go. After that, then use a taxable account.

You do not need to open a traditional IRA at this time to receive your retirement plan monies. That is easily done at the time you retire.

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