UnThreaded | Threaded | Whole Thread (33) | Ignore Thread Prev | Next
Author: TwoCybers Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: Roth investing/withdrawing at 60 Date: 3/15/2012 7:42 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 3
I tend to disagree

You are correct about being able to withdraw all you want tax free. But if you bury gold in the backyard you can take out all you want tax free. The point here is the money you invest in the Roth was taxed before if went in -- so the only "saving" you have is for taxes on the net gains in your Roth.

I have read several different studies on Roths and all of them say a few things.

#1 Roth's have value if the goal is to pass money the Roth owner will not need to the next generation without taxes. (But keep in mind estate taxes don't happen on over 90% of the estates.)

#2 Assuming the Roth owner is going to use/spend the funds - than a Roth does not make sense unless the tax rate (that would be total tax rate, not marginal) at the time of withdraw is less than the tax rate when funds are placed in the Roth. i.e. If in retirement your tax rate is less than when working, it it doubtful you will pay less taxes in total and/or have equal purchasing power.

#3 People pushing Roths, generally have a financial interest i.e. they want to sell you something.

#4 If one assume over the remainder of your life, the averages for inflation and investment returns since 1929 happen, the break even point for funds in a Roth vs a 401K is somewhere beyond 20 years -- i.e. you must not take funds out for at least 20 years, or you will loose. (This assumes your tax rate in retirement is the same as when working.)

As an aside, if for you Roths are beneficial to you, you can transfer all your current IRA funds into a Roth today -- and pay taxes of course. I mention this as a counter point -- there are people who say mortgages are a good idea because you can deduct interest expense. How many of those people advocate a person with no mortgage go to a bank and take out a loan for the purpose of creating a tax deduction?

Gordon
Atlanta
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (33) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
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.
Post of the Day:
Berkshire Hathaway

The American Energy Revolution
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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