The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Should I Convert?||Date: 6/21/2011 5:55 PM|
|Author: Bob78164||Number: 113558 of 121572|
Here's my situation:
I am 27.
I have a Traditional IRA with about $3,000.
I have a Roth IRA with about $42,000.
I have read that it's good to have tax diversification, and this makes me think it's safe to have 2 accounts. However, I believe the Roth is superior to the Traditional IRA, so I feel that I should convert. What do you think? Thanks in advance for any feedback.
I'd convert. Here's why.
I'm assuming that current law will remain more or less the same. If so, there will probably come a day when your income means you can no longer make contributions to a Roth IRA. But you'll always be able to make contributions to a traditional IRA and then convert them to a Roth. If the traditional IRA is empty at the time you begin this process, the next tax effect is essentially the same as contributing to a Roth.
But if there's more money in the traditional IRA than your basis there, that won't necessarily be the case. That's particularly true if you are covered by a retirement plan at work -- then you'll have a basis in the traditional IRA because your contributions won't be deductible (once your income is sufficiently high). --Bob
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