I am looking for recommendations for conversion calculators or your comments on converting a Trad to Roth IRA. I have used several calculators (CCH, Dinkytown and Fool for example) and of course I get a different response from each. I believe the Fool calc is the most comprehensive. What do you think? Suggestions?
Vanguard has one too, WWW.VANGUARD.COMDozer
I am now 66 years old. I am converting my Traditional IRAs to Roth IRAs at a rate which causes a Federal Income Tax expense I can afford.I did not start a Roth when they first became available because I could not believe that Congress would be so generous. NO taxes on the accumulated earnings EVER??? And no mandatory withdrawals at 70 and one half years of age???If you are in the thirty to forty year old class, I think it is a no brainer. A traditional IRA is 100% taxable ordinary income when you take it out. Yes, you got a Federal Income Tax itemizable deduction when you contributed, but contributions are a small part of the total you hope to withdraw.I opened a tradtional IRA for my wife with five annual contributions of $2,000; the last contribution was made in 1982. She has withdrawn $24,250 and has about $81,000 left. I would have happily given up the $10,000 tax deduction to keep $105,000 off our Form 1040.Set up a spread sheet with a $3,000 annual contribution, a modest rate of return like 5%, opening balance zero, and see how soon the annual earnings swamp the annual contributions.
If you are in the thirty to forty year old class, I think it is a no brainer. A traditional IRA is 100% taxable ordinary income when you take it out. Yes, you got a Federal Income Tax itemizable deduction when you contributed, but contributions are a small part of the total you hope to withdraw.Unfortunately the Roth is no more generous than the Traditional IRA financially. While the taxes paid on the initial contributions may seem like a small part of the total, that small part compounds over time. If your tax rates are the same, you'll wind up with the same amount of after tax money whether you choose a Roth or a TIRA, all else equal.There is an interesting exception where the Roth works out better if you're able to max out all available retirement plans, but for most people with a retirement plan at work it's a wash.Nick
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