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Author: ctbinv Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121341  
Subject: to Roth or not? Date: 7/11/2000 6:30 PM
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I'm 32 years old and have just over $30,000 in a traditional IRA. I have been making steady annual contributions of $2,000 for the last 8 years or so and I intend to continue. Lately, I've been considering the change to a Roth IRA.

Currently, I'm taking the year off of work to pursue some other interests and work on my home. Since my income this year will only be capital gains and I'll most likely be in the 15% tax bracket, is it a good time to move to the Roth because of my lower tax bracket this year?

Also, is there a real benefit to someone like me to change to the Roth IRA now? I've always enjoyed the tax deductible contributions of my IRA and realize I won't be getting those with the Roth. However, I do know that my withdrawals will be tax-free at retirement. Is there a calculator available where I can punch these numbers in and make the comparison?

Thanks a lot,
ctbinv
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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37376 of 121341
Subject: Re: to Roth or not? Date: 7/11/2000 8:02 PM
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ctbinv writes (in part):

Currently, I'm taking the year off of work to pursue some other interests and work on my home. Since my income this year will only be capital gains and I'll most likely be in the 15% tax bracket, is it a good time to move to the Roth because of my lower tax bracket this year?

I reply:

Yes, provided that you will have enough cash to pay the taxes without raiding your IRA. After the time value of money is taken into account, the choice between switching and not switching to a Roth is a break even proposition, assuming that tax rates remain the same. In your case, though, your tax rate is lower now than it will be at retirement (right?), so the conversion makes sense.

Two further points. First, you might want to ensure that you have $2000 in earned income next year, to enable you to make next year's contribution (which also should be to a Roth, for the same reason). Second, even if you choose to convert, you may still make future contributions to a traditional, rather than Roth, IRA. --Bob

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Author: sjfans Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37378 of 121341
Subject: Re: to Roth or not? Date: 7/11/2000 8:50 PM
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<<<<< Also, is there a real benefit to someone like me to change to the Roth IRA now? I've always enjoyed the tax deductible contributions of my IRA and realize I won't be getting those with the Roth. However, I do know that my withdrawals will be tax-free at retirement. Is there a calculator available where I can punch these numbers in and make the comparison? >>>>>

Here is a calculator:


http://www.mortgage-calc.com/ira_tax_effects/ira_roth_vs_traditional_ira_calculator.html


I'm not sure if is exactly what you're looking for but may be a place to start.

sjfans

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Author: ctbinv Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37430 of 121341
Subject: Re: to Roth or not? Date: 7/13/2000 2:04 PM
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<<<<< Also, is there a real benefit to someone like me to change to the Roth IRA now? I've always enjoyed the tax deductible contributions of my IRA and realize I won't be getting those with the Roth. However, I do know that my withdrawals will be tax-free at retirement. Is there a calculator available where I can punch these numbers in and make the comparison? >>>>>

sjfans writes:

Here is a calculator:


http://www.mortgage-calc.com/ira_tax_effects/ira_roth_vs_traditional_ira_calculator.html


I'm not sure if is exactly what you're looking for but may be a place to start.



That is exactly what I was looking for and it gave me some interesting results. I've decided to stay with my traditional IRA and invest my tax savings for (hopefully) a more comfortable retirement.

Thanks to both you and Bob for the replies.

ctbinv

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