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Author: TheBreeze 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 75625  
Subject: Re: considerations in converting to roth Date: 11/27/2009 1:33 PM
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Personally, I wouldn't convert. If you're like me, you have no pension and any income you get will be from IRA withdrawals and other investments.

I did convert part of an IRA to a Roth, and also made new contributions to a Roth. My reasoning was this: I don't know what the tax laws and tax rates will be in 10 or 20 years, so it will probably pay to have some of various kinds of money--Roth IRA, regular IRA, 401k, etc. When the time comes, I can arrange things to the best benefit.

It also helps that my situtation puts me at the 15% federal tax rate right now (four kids, mortgage, etc.). If I were at 3X%, it might be harder to justify paying tax now vs. later.

Final piece of information for thought: You can put "more" money into a Roth...after taxes. Because the amount you can put in either a traditional or a Roth is the same, think of it this way: The traditional IRA lets you put in the amount you'll keep plus the amount you'll pay in tax on the principal and the gains. For the Roth, you're putting in the full amount as what you'll keep, and paying the taxes with other money.
Example: Put $2000 into a traditional IRA, it grows 5x to $10K, you pay 25% tax, so you keep $7500.
Put $2000 into a Roth IRA, it grows 5x to $10K, you keep $10000. The catch is you have to have paid the 25% (assuming same tax rate) up front. The $500 you pay in taxes the year you make the contribution to cover the $2000 would've grown to the $2500 difference between the two IRAs. Math-wise, it's the same, but with the Roth, more money is left after taxes at the end.
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