Re: Roth IRA

From: "Steve Foulks" <steve_foulks@up.bresnan.net>
Subject: Re: Roth IRA
Date: Thu, 5 Nov 1998 12:06:23 -0500

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>From: BARBARA SCHUTZ <bfs8488@email.unc.edu>

>HI all you Persfinners: I have a couple of questions about the Roth Ira I
>hope someone can help with. 1. I recently retired and started up my own
>business by opening a booth in an antiques mall. Can I start up a new
>Roth IRA if I earn enough from this business? (I may have a loss with
>start-up costs.) 2. I already have two regular IRAs, but I am 66 and am
>uncertain about whether or not it is worth it to pay the taxes and convert
>at my age. What do you think? Thanks. BFS

Regarding your first question, you can contribute 100% of your earnings from
labor up to $2,000.  If you show a tax loss and are a sole proprietor, you
can contribute nothing.

2.  No one is going to be able to give you a diffinitive answer until you
supply them with:
 - the taxes you will pay on the rollover,
 - the return you will get on your investment,
 - the length of time until you withdraw from the Roth,
 - and your tax rate at that time that you actually do withdraw the money
from the Roth.

Once one has all of this stuff, the solution becomes a "time value of money"
problem.

As a general rule, for what it is worth, the higher the return, the longer
the time period until you need the money, and the smaller the tax rate
differential, the more attractive the conversion is.  Many brokerage firms
and mutual fund companies have internet site devoted to doing the math for
you.

Steven M. Foulks, CPA, CFP, PhD
http://www-instruct.nmu.edu/business/sfoulks/
email: steve_foulks@up.bresnan.net


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