Conversion to a Roth IRA???

[Boomer]

For the past week or two, I have found that my thoughts are turning to converting a traditional IRA into a Roth IRA. Could it be that my current income tax rate will never be this low again? I must admit, the thought has crossed my mind. I know that is not the way it was likely to be, but lately it appears that all bets are off. The taxes of the future are looking pretty scary to me right now. But what do I know?

Is it worth it to pay taxes now to convert, giving up that tax-deferred status for tax-free status down the road?

But I must say that somewhere in the back of mind, I get a little hinky thinking about whether those taxpayer abusers, also known as Congress, could just revoke the Roth tax advantage at some point and collect from me twice.

I have just started to do my homework on this. And like I always say here when I write about money stuff, I am not a financial professional of any kind. And I will certainly talk to my accountant eventually about this. But for now, I am doing my homework. I do homework sometimes. Last week I kept posting that FDIC information on here to see if anybody wanted to share my homework.

There sure is a lot to know about converting to a Roth. First, you have to figure out if you even qualify. Then if you do, and you decide to go through with it, you have to make sure it is done exactly right. And you have to decide where to take the account and how you feel about all that, including the safety of the account. And a bunch more stuff, too. . .

Wow! I think I will go outside and play instead.

Boomer

[jojo]

Boomer, I think you've referenced Money Magazine before but this past issue has an excellent article on Roth conversions. Of course, the bottom line as you note, is what will the tax rates and laws be? With current circumstances all bets are off.

[SNOK]

In doing your homework, be sure to look into the Roth rule that restricts access withing 5 years to keep the tax-free status of any earnings that may be used within 5 years. I don't know if it applies to a conversion, but it would be important to know, if you expect to use any of the earnings within 5 years.

[Boomer]

Hi jojo,

Please let me know the month of the issue of Money. My subscription to that one lapsed.

I am in the thinking stages on this one still, but I cannot help but think that lower taxes are not in the future. I am a big believer in not doing everything all at once. If it ends up that I can or want to do a conversion, I would not do the entire amount. Paying taxes is never fun to do.

I am really watching some stocks right now and thinking about buying inside a Roth to try to capture growth most effectively. Thus the homework assignment I gave to myself. I feel like inside a Roth the timeline is a real advantage. Nobody makes you start cashing out. I am quite a way from 70 and a half, but this could be a long, long ride. Who knows? Not me.

These are definitely uncharted waters. I don't care what they say on television as they go on and on. One day last week I noticed that a lot of those money people had kind of a wild look in the eye. They have no clue either.

But for some reason, the idea of conversion to a Roth has taken up residence in my financially conservative brain.

Thanks for the information. I like Money Magazine.

Boomer

[Boomer]

When I began to babble a few minutes ago about stocks, I forgot to say that part about how I have no idea what I am talking about. My education in matters of money is strictly self-tutoring. I am not a financial professional. It is just an interest. And I always try to gauge the potential tax advantages of any of it. And then I go talk to the accountant.

And shneal, thank you for that reminder. These conversions sure have a lot to them.

So anyway, even though I like to talk about this stuff, I have no credentials. Oh, I do have one client though. -- Mr. Boomer.

Boomer

[jojo]

The article is in the Oct. 2008 issue. I almost let my subscription lapse because of the repetitiveness but I do find some nuggets,

[Boomer]

The article is in the Oct. 2008 issue. I almost let my subscription lapse because of the repetitiveness but I do find some nuggets,


Thank you, jojo,

I will track it down.

I must now shamelessly confess the reason I let my subscription lapse. Here goes: I felt like so many of the articles were aimed at people who were so much younger than me. Of course, I feel that way too when I read Glamour while I am getting my roots done at the salon. You know, I am not sure if there is any such thing as a "Glamour Don't" anymore.

But you are right. There are still some good things in Money Magazine. I will take another look at subscribing.

My favorite subscription is "Kiplinger's Retirement Report." It is not the magazine. This one is around 16 pages, only a couple of ads, set up to go into a binder, and everything in it is about me! How much better could a subscription get! I wonder what next month's will have to say about all this mess and the effect on retirees.

Boomer

[JohnN]

Boomer,
I've done a conversion to a Roth. Yes there are a few things to be aware of, but it can be a very good $$ idea.

I try to convert an amount that reaches the top of my tax bracket each year (since it'll never be lower, I figure). If you want to talk about it, send me a note and I'll give you some specifics.

[Boomer]

Boomer,
I've done a conversion to a Roth. Yes there are a few things to be aware of, but it can be a very good $$ idea.

I try to convert an amount that reaches the top of my tax bracket each year (since it'll never be lower, I figure). If you want to talk about it, send me a note and I'll give you some specifics.

JohnN,

I think sometimes that you might be my long lost twin brother. Only you are a couple of steps ahead. Converting annually makes a lot of sense to me, and I had never really thought of it. We have done one conversion since retirement, to let stock hang out inside the Roth. But that was just once. Doing it all along would have been a good idea I think. But I never looked into it again. -- until now. I keep thinking I see handwriting on the wall.

I cannot create any scenario in my mind where our taxes will get lower in the future. How can they?

But what do I know? No credentials, I always make that clear. It always just comes from my gut. Some right. Some wrong. But this Roth conversion idea is not going away. I like the idea of no forced withdrawal timeline. I am not near 70 and 1/2, but who knows how long the long term will have to be this time.

Oh well.

Thanks, JohnN.

Boomer

[Boomer]

jojo,

I just wanted to let you know that I bought the October issue of Money magazine that you told me about here. I have not read the article yet, but I will. This conversion is still very much in my thoughts.

But if I do not work in my yard today, I am going to have nothing left out there. It has not rained here much at all lately in my part of Ohio. A fraction of an inch maybe in weeks. It is getting awful.

We have a project going on here and I thought the backhoe had run over my rain gauge. But darn it, I found it. And had to face reality. I just had to look. A fraction of an inch of rain. Not good.

I will be standing around in my yard, watering my pitiful plants and thinking about the new stuff that will have to be planted.

I think while I garden.

I wish I could read Money magazine while I garden.

Boomer

[Boomer]

For anybody out there who may be thinking about Roth conversions, the article recommended here by Jojo is excellent.

It is in the October issue of "Money" and is called "Retire Without Taxes." The article is about all aspects of the Roth, not just a conversion.

Things are clearly laid out in a question and answer format which is quick and easy reading. I had forgotten about that thing where you can change your mind and convert back to a traditional IRA with something called a recharacterization and then back again. Sounds a little complicated, but could be a good option. In fact, the question for that part of the article was, "What happens if I convert and then the market suddenly tanks?"

Boomer

[graciegirl]

For anybody out there who may be thinking about Roth conversions, the article recommended here by Jojo is excellent.

It is in the October issue of "Money" and is called "Retire Without Taxes." The article is about all aspects of the Roth, not just a conversion.

Things are clearly laid out in a question and answer format which is quick and easy reading. I had forgotten about that thing where you can change your mind and convert back to a traditional IRA with something called a recharacterization and then back again. Sounds a little complicated, but could be a good option. In fact, the question for that part of the article was, "What happens if I convert and then the market suddenly tanks?"

Boomer

I see no reason why you can't just become a protestant again.:1rotfl:

[Boomer]

I see no reason why you can't just become a protestant again.:1rotfl:

I know you may not believe this, but every time I typed the word 'conversion' I thought along the exact same line. Is there something in the water in this town?

Boomer