To Roth or not to Roth?

mamabear1234
Sat, 12 Dec 2009 17:17:39 +0000

^The penalty comes in if you have to use IRA funds to pay the taxes, thus an early withdrawal.

I’m assuming taxes will be higher when we are retired, so I am definitely converting to a Roth in 2010. The only question in my mind is whether to spread out the tax owed over 2011 and 2012, or just pay it in 2010, while tax rates are still lower. Since I will have 2 in college in 2011, the extra income in 2010 would hit on FAFSA. After that year, I will be back to one in college.

I would not do it if I had to take the money to pay the taxes out of the IRA. I just recently rolled my 401k from my former employer into an IRA in preparation to convert in 2010. I had a fairly large after-tax contribution in the 401k that I held out to pay the taxes.