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Author: MrDP Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76394  
Subject: Roth IRA Rollover Date: 2/22/2000 11:58 AM
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Hi everybody,
I'm 25 years old and have been putting the maximum amount into a regular IRA since I was 18 (back in 1992). Anyways, I am considering rolling over the entire amount (~$45k) into a Roth IRA now while I still make minimal amounts of income (I'm still a student). The only thing is, I may have to take out a loan to pay the taxes. I could sign up for a low rate (6.9% or so) credit card intro rate and pay off the tax bill within that intro period.

My question to you is: Do you think its worth it?

MrDP
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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19389 of 76394
Subject: Re: Roth IRA Rollover Date: 2/22/2000 12:07 PM
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Yes, its worth it assuming you eventually get a good job, wind up in a higher tax bracket and that continues even after retirement or your investments do extremely well and you have a very large balance in the account at retirement.

But these are all unknowns. You will have to decide for yourself what is likely to happen in your case. Personally, I would put a few numbers into a spreadsheet program and see where the breakeven points are.

Best of luck to you.

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Author: mattpam Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19391 of 76394
Subject: Re: Roth IRA Rollover Date: 2/22/2000 12:16 PM
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Your strategy makes sense. It looks like a heaven sent opportunity to take advantage of the 'taxfree for ever' Roth provisions. Generally 'fools' are opposed to using credit cards in investment stategies, but if you feel confident you can pay it off in within the 6-month, low interest period give a whirl! With sound 'foolish' investment strategies you will be a millionaire by the time you retire - lets hope a million d0llars will buy more than a cup of coffee in 2033! Good Luck - Matthew

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Author: 1Vagabond One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19423 of 76394
Subject: Re: Roth IRA Rollover Date: 2/23/2000 2:27 PM
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MrDP...
Yes. I believe that it would be worth the Rollover to a Roth. But, can you afford it. If you can't save enough in one year to pay the taxes, I would question whither you could do it at this time. Maybe only rollover the amount that you could afford to pay the taxes on. Put all these questions into your spreadsheet. Then you could answer your own question.

What ever you do, don't use the money in the IRA to pay the taxes when you rollover.

One other thing, leave the IRA alone. Start a new Roth IRA. The proceeds of the Roth will only be drawn at 59 1/2 tax-free. The traditional IRA could be what you use for early retirement.


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Author: MrDP Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19425 of 76394
Subject: Re: Roth IRA Rollover Date: 2/23/2000 3:12 PM
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1Vagabond wrote:
The traditional IRA could be what you use for early retirement.

I ask:
Is it possible to do this before age 59 1/2 without penalty?????

MrDP

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Author: waldronr Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19426 of 76394
Subject: Re: Roth IRA Rollover Date: 2/23/2000 3:20 PM
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Nope.

Hate to cast the dissenting vote, but I would advise you to finish school, get a job, get free of debt, then plan/execute your investments. In that order.

Have you ever heard about the "Best laid plans of mice & men"?

They frequently go astray, as I recall. You have lots of time to get your investments in order, but I do agree with starting early, just make sure that 45K IRA is properly invested, e.g. you could roll it over to an account at a discount broker and invest it as you see fit.

Good Luck,

Ron W.

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 19440 of 76394
Subject: Re: Roth IRA Rollover Date: 2/23/2000 5:26 PM
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MrDP:

1Vagabond wrote: <<<<"The traditional IRA could be what you use for early retirement.">>>>

"Is it possible to do this before age 59 1/2 without penalty?????"

Yes, most definitely, if you follow the rules - 72(t) in the IRC a/k/a SEPP. Substantially Equal Periodic Payments, IIRC.

Mosey over to The Retire Early Board in Speakers' Corner and do a search for 72(t) and SEPP; you will have a wonderful reading list.

Hope this helps. Regards, JAFO




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