Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
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.

There is a lot to think about. Let us assume that congress does not change the rules for IRAs and Roth IRAs (an extremely dubious assumption, IMAO). In this case you have to find out if the tax-free returns on your investments will grow fast enough in the Roth IRA to recover the cost of sinking some of the investment in the regular IRA into income tax. So you are going to have to know what your income tax rate will be when you start making minimum required distributions from your regular IRA. Can you pay the income tax from funds not in your IRA?

The next thing I worry about, but you may not, is that they may pass the "Retirement Preservation and Security Act" (I made up the name) that requires you to invest 15% (I made up that number) of your IRA in US treasury bonds, or a government annuity or something. The advantage of making you get a government annuity is that at your death, the government, not your heirs, get any remaining assets of the annuity And you will need to know if they do the same to Roth IRAs as well. They are despairate to raise revenue and with all the money lying around in retirement accounts, what better place to get it? NJ made the state retirement funds invest in NJ bonds, and now the pensionners are screwed. How they got an actuary to sign off on that I cannot imagine. If a state can do it, I assume the feds can do it too.
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
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 Glassdoor #1 Company to Work For 2015! 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