UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76235  
Subject: Re: Roth IRA conversion Date: 8/20/1999 2:39 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Greetings, Bwlee, and welcome. You wrote:

<<I have two IRA's (a traditional and a Roth). I am wondering if I should
convert my traditional IRA to a Roth IRA this year. Currently have
$16,000 in my traditional IRA and $4,000 at my Roth IRA. I am 25 years
old and this year my income will be particularly low (about 6000).

I used the Motley Fool "Should I convert my traditional IRA to a Roth
IRA" calculator, and its analysis confused me.
It said I should convert everything in my traditional IRA to a Roth, BUT
in the future I should make contributions to my TRADITIONAL IRA NOT MY
ROTH IRA. This doesn't make any sense to me. Considering my age,
wouldn't I want to keep building my Roth IRA so that I could collect tax
free withdrawls which are likely to be much bigger than any taxes I
would pay on contributions?>>


The conversion issue depends on a lot of factors, not the least of which is your tax rate today versus that in retirement, how the taxes will be paid, how long the money can stay in the Roth, and the size of your potential estate. For details, see my analysis of this issue in the post appearing at http://boards.fool.com/Message.asp?id=1040013000441002&sort=postdate.

As to the conversion calculator, that's simply a link to one offered on line. It was not developed by TMF. I think, though, that the result has to do with your assumptions regarding the rate of return in your IRA choices and your assumptions regarding your tax rates today versus those in retirement. The calculator gives you some examples in the options section when you get down to the inputs for the future. Look at the examples provided, and you might get an idea of what's happening in your assumptions.

Regards..Pixy
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Macro Economics

Heads Up, Real Estate Investors
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement