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URL:  http://boards.fool.com/so-i-looked-into-a-roth-ira-but-if-we-decide-to-21850200.aspx

Subject:  Re: Joining Retirement ideas Date:  1/3/2005  5:31 PM
Author:  babyfrog Number:  43858 of 74759

So, I looked into a Roth IRA, but if we decide to file jointly, I don't think we'll be able to invest in one of those.

Once you're married, if you decide to file separately, you almost certainly will not be able to invest in a Roth IRA. If you decide to file jointly, you may or may not be able to invest in Roth IRAs, depending on your joint Modified Adjusted Gross Income. (The income phase out for MFJ started at $150,000 in 2004, I'm not sure where it starts now, in 2005.) If you're not married yet, you may still be elegible for making 2004 Roth IRA contributions based on your 2004 incomes as separate individuals. If your modified adjusted gross income was low enough (I think the phase out starts at $95,000 for 2004), you can contribute to a 2004 Roth IRA up to Tax Day (usually April 15), 2005.

Are there other options?
With current qualified dividend and long term capital gains taxes low, investing in low-churn, low-fee stock mutual funds or buy-and-hold into individually researched stocks is more tax friendly now than it has been in a long time. Of course, those low rates are set to expire in the absence of Congressional and Presidential action, so caveat emptor...

My current choice, should my wife and I ever be at the point where we would be inelegible for Roth IRA contributions, is a non-deductable Traditional IRA, for the reasons put forth in this post: http://boards.fool.com/Message.asp?mid=20490640

How do you decide if you'll be in a higher tax bracket when you retire?
You stick a finger in the air, guess which way the political winds will be blowing, and guess - Seriously. If you want to, you can run some spreadsheet or calculator-driven estimates based on your expected assets, the form those assets will be in (Traditional IRA, Roth IRA, 401(k), pension, annuity, regular brokerage account, etc...), the current tax laws as you expect them to apply when you're ready to retire, and your expected draw-down patterns. I personally use a number between 30% and 40% across federal and state, varying based on how aggressive or conservative I want to be.

I saw that someone mentioned in a different post that with a 401K you have to take it all out in a lump sum when you retire. Did I get this wrong? Will I have to take it all out and pay taxes on it as if I had earned it all that year?
That is not usually true. There is occasionally an advantage to taking an "in-kind lump sum distribution" if a 401(k) is very heavily concentrated in stock of the employing company that has appreciated significantly over its basis price. For most people however, that's not the case. Additionally, if the 401(k) balance is low enough ($5000 or below, if I remember correctly), the employer may have the option to require you to roll it over to an IRA or take another distribution following your separation from service.

Best of luck to you,
-Chuck
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