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edyboom223 writes:

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 reply:

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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