Quote:
Originally Posted by ajbrown
This site often gives me something new to consider. I have always contributed the maximum I could to my 401k. Until about 5 years ago that was 100% traditional IRA, I honesty forget when the companies I worked for started the Roth option as part of the 401k.
Five years ago, I continued with the maximum 401k contribution, but put 50% in a Roth and 50% in traditional. I did that because I simply did not know what would be best.....
Trying to predict the incompetence of our leaders for the next 20 years is difficult, but I find it hard to believe my income could be anywhere near it is now, thus i should be in a lower tax bracket?
I do not know if the answer is straight forward to me, but the OP has given me something to consider.
PS. I always enjoy reading opinions from others with more experience than I in these subjects. If nothing else it gets me thinking about something I was otherwise ignoring....
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It depends on your age and when you will need to use your IRA money.
The farther you are away from needing the money, the longer your money will grow tax free in a ROTH, the better. If you are in a low tax bracket now, it might make sense to convert from your traditional IRA, pay taxes now, and let it build tax free. Basically, you want to convert up to the amount that will keep you in the same bracket. For example, if you are married filing jointly, you can have up to $72,500 in income to stay in the 15% bracket. So if your AGI for 2012 was $50,000 you could convert up to $22,500, pay 15% tax on April 15. Then, when you withdraw the money, no additional taxes. You can keep converting every year until it is all ROTH. Also, you are not required to make distributions at age 70 1/2 so if you don't need the money at that age, it can continue to grow tax free. Always consult a tax advisor. This is a just an oversimplified example.