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Subject:  Re: Roth conversion complicated by other factors Date:  2/24/2001  9:35 AM
Author:  skinnyfong Number:  28085 of 88520

You also forgot to take into account the "penalty" on the 403b. When you take the loan and pay it back, you are using after-tax dollars to put the money back in. Once you retire and withdraw this money, you will once again pay taxes on the money you put back in. So you are going to be paying taxes twice on monies used to convert the IRA. This is something that many people fail to realize before they take loans out on their 401(k). Not to mention the lost opportunity the loan money is missing out on by not being invested.

You said that you could fall back on getting the principal out of your Roth IRA. This is true only after the money has been in the Roth for 5 years. Before 5 years, you will pay a penalty if you withdraw the principal.

IMHO I don't think the cost of converting the IRA at this point is worth it. But this is a decision you have to make. You may want to re-run all your numbers and see if it will be a good fiscal descision. Perhaps you could convert a portion this year and a portion next year. This way you could spread out the tax burden over a period that you may be able to pay with non borrowed money.

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