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If I had an AGI of $100,000, after the 2% rule, I could a claim $1098.55 loss. If I had a 25% tax rate, this would convert into about $823.92 into my pocket.

Aw, you were doing so well and choked at the end.

Working from my simplified Schedule A entry of $3100, you get tax benefit from $1,100. At a 25% tax rate that's $275 added to your pocket.

I don't know how much you were planning on contributing for 2008, but if it was more than $4,855 ($10,000 - $5,145) you have given up that contribution and all its tax-free earnings in exchange for $275 in your pocket. Don't spend it all in one place.

2 things crop up from my end:

The $275 in the pocket is actually, as far as I can tell, a $275 REDUCTION in tax liability, not necessarially cash in the pocket.

If you want cash in the pocket, just take it from the funds in the ROTh accounts and quite fooling around with this do over. The potential long term, compounded, tax free gains , to me, would immediatly preclude doing anything at all with the ROTHs. Of course, if you are not satified with the performance, put it in something else.

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