On Wed, 3 May 2006 19:27:28 -0500, Will Trice
<wwtrice[at]paragondynamics.com> wrote:


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Looks like another job for consumption smoothing. <g

-HW "Skip" Weldon
Columbia, SC

xiongnu[at]my-deja.com wrote:

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This probably only makes sense if her marginal tax rate in retirement
will be more than it is now, and if she uses money outside the IRA to
pay the tax on the conversion (i.e. she doesn't withdraw from her IRA to
pay these taxes).

-Will

hi,

i got a similar question.

my mom made less than $30k last year and the year before because of
extended unemployment period. she has a traditional IRA account with
about $20k. she didn't make any contribution towards IRA for the past
years because of her job situation for the past two years.

now she's going to retire in a few years (five to be exact). does it
make sense to convert her IRA to Roth IRA now so that she can withdraw
the $ tax-free after retirement and have minimum penalty on her this
year's return because of her income level?

On Mon, 24 Apr 2006 20:44:57 -0500, "John" <john.corey[at]gmail.com
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I don't expect to be not working (or underemployed) in the near term.
Doesn't mean they couldn't decide to replace me with a
chimp tomorrow but I don't forsee it.

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True, and someone who knows what they're doing should watch for
this, but that wasn't the point of the original message.

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I don't disagree with this, but again it wasn't the point of the
original message.

If someone is in the 28% bracket and pays surplus cash on the
conversion, they would pay more than if they were in the 15% bracket
paying surplus cash on the same conversion, right?

If someone is in the type of profession where they may be
fully employed one year and underemployed the next year why should
they do the conversion in the years they are taxed the most?

But since we don't know what tax bracket the original poster is in,
this may be a moot point.

Glenn,

I sense that we do not have the full picture here.

1. There is an implied message that you are expecting to not be working
in the near term.

2. There is also the issue of the funds growing so that there is more
to tax when you do the switch.

I think someone else was more astute (compared to the message from the
accountant). Look to convert when ever possible without jumping tax
brackets. There was also the comment from someone else that you should
use after tax dollars to pay the taxes so you move the full amount
(sort of like an extra contribution). Hence the conversion should be
when you have surplus cash

Also take a view as to what ones tax bracket might be in the near
future (job and impact of tax law changes from Congress).

John B. Corey Jr.
Chelsea Private Equity, LLC
+1 (503) 906 7840 x1108
+1 (503) 210 0227 (efax)
john.corey[at]ChelseaPrivateEquity.com

Looking for hard money for you latest real estate deal?
Visit www.ChelseaPrivateEquity.com

Glenn W. wrote:
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Your tax bracket at retirement is also subject to the whims of Congress. This
factor is so large and so random that I wouldn't be basing many decisions on my
expected retirement tax bracket under current law.
-- Doug

"Russ" <russ.rimmerman[at]gmail.com> wrote
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Many folks try to achieve an income from their retirement
portfolio identical, or near so, to that they had
pre-retirement. In addition, the point often is that young
people start at a low income job, and so are then in a low
tax bracket. Great time to contribute to a Roth, because
their W-2 income will grow in the coming years, generally
speaking, putting them in a higher tax bracket.

In addition to what others have said, the internet has a lot
of free online Trad-to-Roth IRA calculators, with
commentary, for guidance. See for example:
http://moneycentral.msn.com/investor..._roth/main.asp

Or google for {convert Roth traditional IRA calculator}.

On Sun, 23 Apr 2006 14:23:41 -0500, "Russ" <russ.rimmerman[at]gmail.comwrote:

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I don't know what tax bracket you're currently in, but I was advised
by my accountant to wait until I had a year where I wasn't working
so that I'd be in a lower bracket than where I am now before
I did the conversion. Since the appreciation is counted as current
income then I'd pay less taxes on the conversion.

Russ wrote:

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As other posters stated, all pre-tax money is taxed when withdrawn, so
you can retire in a much higher bracket.

My advice is to figure out exactly where you fall,
see http://www.fairmark.com/refrence/index.htm to help.

say your taxable income (after deductions/exemptions) is $25,000.
You could convert 5650 and that would keep you in the 15% bracket. The
very next dollar is subject to 25% tax. (which starts at $30,650 in '06
for a single person).

This strategy would let you convert over time and save you quite the tax
hit in 30 years.

JOE

"Sandra Loosemore" <sandra[at]frogsonice.com> wrote in message
news:m3vet0yrsz.fsf[at]localhost.localdomain...
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And don't forget that IF your are fortunate enough NOT to have
to use the ROTH to live on, you are NOT required to take out
any M R D ...........
Cal

"Sandra Loosemore" <sandra[at]frogsonice.com> wrote in message
news:m3vet0yrsz.fsf[at]localhost.localdomain...
- quote -

"Russ" <russ.rimmerman[at]gmail.com> writes:

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Yup; as long as you have the money to pay the taxes without dipping
into your IRA assets, Roth conversion is usually a good deal. You are
effectively shifting assets to tax-sheltered status, since you get to
convert the entire amount of pre-tax money in the IRA to post-tax
money. Another slight benefit is that the fewer investment accounts
you have to keep track of, the easier life is.

-Sandra the cynic

Any distributions you take from an ordinary IRA or a 401(k) are taxed
as ordinary income. Furthermore, under current law, up to 85% of your
Social Security benefits (if they still exist when you reach retirement
age) could be subject to income taxes. Of course, Roth IRA
distributions are not taxed.

Dave

I have around 22K in a Traditional IRA and recently started a Roth that
now has around 6K. I can only assume I will be in a higher tax bracket
when I retire, since I'm currently only 34 years old, and get usual 3%
raises every year.

I have a good amount of emergency cash in savings (earning 4.8%
interest).

Would it make sense for me to convert the 22K in Traditional IRA over
to my Roth? Would I likely benefit from this conversion? I have
enough to pay the taxes in my emergency fund (and still have enough
left over for emergencies).

One other question - when you retire, your income in theory goes to
$0/yr from your employer. Wouldn't this mean you would be in a lower
tax bracket when you retire rather than a higher tax bracket? Or do
you have to include all your retirement income in this tax bracket
figure?