Elizabeth Richardson wrote:

- quote -

You are right on that, of course. The examples I offered are those that
make the benefit obvious. The guy that worked for 5 years after college,
and packed his 401(k) so that he has $100K saved, but now is going back
to grad school. A no-brainer to split that money in half and convert it
for the two years he'll have no other income. The large shifts in
bracket just illustrate the benefits of the conversion more clearly.
Examples I can write in a few sentences vs the spreadsheets I tend to offer.

As I did state, the other benefits abound. The Roth helps avoid the
phantom tax brackets in retirement where social security is a marginal
50%. If the death tax comes back with a vengeance in 2011, it's a great
way to reduce one's estate, or even now, to leave money to one's
non-citizen spouse. And say what you will (not you, per se, but any
reader) about greedy heirs, it's just a better way to leave money to them.

And I think we agree that no one know what punitive tax brackets will
exist in 4 years, let alone 20. So here's a chance to do an end run
around uncle sam.

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:vcmdnbPQkvQOLJLbnZ2dnUVZ_vGinZ2d[at]comcast.com...

- quote -

However, waiting for a lower income year isn't necessary to do a conversion.
We converted some IRA monies over several years awhile back, and we were
earning the same income, or even a slightly increasing income, year to year.
No, we weren't in the highest tax bracket, but higher than we are in
retirement. For us, the Roth has a couple of advantages over a Traditional
IRA, and we decided to pay the taxes to convert and make sure we would have
those advantages.

Elizabeth Richardson

manian.k[at]gmail.com wrote:

- quote -

One is permitted (subject to income restrictions) to take a regular IRA,
or a portion of it, and convert it to a Roth IRA. They would have to pay
tax on the portion that's pre tax, declaring it as income for the year
it's converted over. I give detailed examples at my site explaining how
this can be a useful strategy to manage one's tax bracket year to year.

I recently interviewed a well paid person (33% bracket) who told me he
was going to take the rest of the year off and begin a new job in 08.
This is his opportunity to roll over his 401(k) to an IRA and convert a
chunk of it to a Roth, just to where he's paying 25% (married up to
$128K). For others, this strategy can be used during periods of
unemployment, or when one spouse takes unpaid time off to have a child.
At retirement, it's a way to manage one's required distributions and
their effect on social security.
JOE

manian.k[at]gmail.com writes:

- quote -

A Roth conversion is when you convert a traditional IRA
to a Roth IRA.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

On Mar 31, 9:27 am, joetaxpayer <joetaxpa...[at]nospam.com> wrote:
- quote -

This might sound dumb, but what exactly is a conversion?


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Slain wrote:

- quote -

I'm back to suggesting a glance at

http://www.fairmark.com/rothira/distrib.htm

because it's better to have a reliable reference.

That said, a deposit into a Roth (a deposit being after tax money that
came from earnings, not from another account) may be withdrawn, and only
its earnings is taxed/penalized 10%.
(This lead me to the dual purpose a Roth can serve early on in one's
saving/investing career)

A conversion a la my anecdotes at http://www.joetaxpayer.com/roth.html
need to age the five years to avoid the tax/penalty.
(And this is the real-life use of conversions to tax-manage one's
accounts. There is no tax tail wagging the investment dog, just some
strategic shifting to help minimize annual tax bite.)

JOE

Reading through various posts here, I am a bit confused about the Roth
IRA withdrawal process.

I thought, once you deposit into Roth IRA, you can withdraw your
contributions only after 5 years, while the earnings only after age of
59 1/2. Is this correct?

Some posts here seem to suggest that you can withdraw the contribution
anytime, without a penalty.

Please clarify