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Subject:  Re: Roth investing/withdrawing at 60 Date:  3/15/2012  1:14 PM
Author:  Watty56 Number:  70358 of 87981

One huge advantage of the Roth is that it does not count in the calculations of how much of your social security will be taxed.

For example if you are in the 25% tax bracket then you could put $133 into a deductable IRA or $100 into a Roth(and pay $33 in taxes) while you are working.

Years later when you are retired and the money has grown ten times then if you are in the same 25% tax bracket you could take $1,333 out of the IRA and pay $333 in taxes to net $1,000 or if you had used the Roth then you could just withdraw the $1,000 tax free.

That sounds like it is the same either way but if you are at the income level where every dollar of income causes an additional $0.50 or $0.85 of your social security to be taxes then that $1,333 in taxable IRA income could also cause an additional $666(1333*.5) to $1133 (133*.85) of your social security to be taxed. In the 25% tax bracket that would cost you an additional $166 to $283 in taxes so in the $1,333 taxable IRA withdraw you would only net $834 (1333-333-166) to $717 (1333-333-283) compared to the $1,000 you would get from the Roth.

For details on how social security is taxed see;

This often is not as bad as it sounds since these taxes will only affect people with more than a certain amount of taxable income and after a you get above a certain amount then the maximum amount of social security is already be taxes so any additional income will not add more taxes on your social security.

Personally when I get close to retiring I will running the numbers to see just how much taxable income I can have without paying taxes on the social security and then I will try to adjust my portfolio to minimize the additional taxes on the social security.

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