Re: Traditional vs. Roth IRA

From: jeff@scrooge.csd.sdl.usu.edu (Jeff Salisbury)
Subject: Re: Traditional vs. Roth IRA
Date: Fri, 15 May 1998 17:00:20 -0600

Next Article (by Date): Setting an interest rate for a private loan "Abbott"
Previous Article (by Date): Re: persfin-digest V5 #14 Messy posts jeff@scrooge.csd.sdl.usu.edu (Jeff Salisbury)
Articles sorted by: [Date] [Author] [Subject]

On May 14,  5:06pm, PowellFamily wrote:
> Subject: Traditional vs. Roth IRA
>
> Personally, I am planning for a lower tax
> bracket.  At that time my house will be paid for, my children will no
> longer be living with us, and I have built up most of my necessities
> already.

Sherri,

If your house will be paid for and your children will be gone, that would tend
to push you into a higher tax bracket and argue for a Roth.

>
> Do I think it would be advisable to change over a traditional to a Roth
> IRA so you can pay taxes today instead of defer them which is what made
> sense of an IRA to begin with?  No Way!

Also, there are other considerations with the Roth besides the higher/lower tax
bracket reasoning:

1. You could look at it from a tax-diversification standpoint.  Maybe you will
be in a lower tax bracket -- maybe you won't.  Also, maybe tax rates in the
future will be higher -- maybe lower.  If you put some retirement funds in both
a traditional and Roth, you have "diversified" your taxes.

2. If you are currently in the lowest marginal tax bracket (15%), you don't
have anywhere to go but up.  In other words, switching to a Roth won't possibly
hurt you (assuming tax rates stay the same).

3. Roths are generally more favorable for estate planning purposes.  For
example, if you expect to have more $ in your retirement accounts than you will
spend in your lifetime, and you want to pass it on to your heirs, it may be
wise to consider a Roth.  With a Roth you will not be forced to take mandatory
distributions at age 70 1/2.

Have argued for Roths, let me say they seem to go against a tax philosophy I
generally follow:

	Delay, delay, delay...
	Then, defer, defer, defer...
	Then, avoid, avoid, avoid...
	And the way you win the tax game, is to die before you pay them...

Under some circumstances, the Roth is an exception to this tax philosophy.  I
for one plan to convert a portion of my IRA's to a Roth...

>
> Sherri
>
> - -
>-- End of excerpt from PowellFamily

- -

Go to Jeff Salisbury LWGate Home Page.