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Mkraft writes:

<<TMFPixy wrote:

Therefore, why recharacterize a Roth contribution?

Pixy, the reason -- as I see it -- is that a person normally in a 15% tax bracket won't want to make a Roth contribution and pay 28% taxes in a year in which his/her income uncharacteristically was large enough to put him/her in the 28% bracket.

Did you still disagree, taking that into consideration?>>

Nope. You're gonna pay taxes on that $2K at 28% whether you contribute to a Roth or not unless you put it in a fully deductible traditional IRA. If you don't, then you'll invest in something taxable. In a taxable account, you'll pay income taxes on any earnings. In a fully deductible IRA, you'll pay regular income taxes in the future on both the contribution and the earnings. Therefore, unless you expect your tax rate to decrease when the withdrawal is taken from the deductible IRA (not a likely event contrary to popular wisdom), the Roth still makes sense to me. And once that contribution is made, IMHO it makes little sense to do a recharacterization. Earning 10% annually, that $560 paid today in taxes is recovered in three years inside the Roth. After that, everything is tax-free gravy.

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