To Roth or not to Roth?

crescent22
Sun, 13 Dec 2009 23:44:45 +0000

The younger you are, the more advantageous it is to convert, as you get more years of untaxed growth in the converted Roth. Of course, tax rates will be lower in 2010 vs 2011+ for those in the 33% & 35% brackets. And also, who knows if the federal government decides to take away this privilege in future years trying to raise revenue.

I’d echo the statements above that if you can afford taking free non-IRA money today to pay for it, do it if you are young. Of course, that can be a tough thing taking money you can use today to aid an account you may not see for 20-40 years, especially at ages when most people are looking to build wealth or pay for things like private schools or colleges for kids.

That all said, a calculation I did using 7% growth assumptions, my state tax rates, and an assumption how the free non-IRA money used to pay the conversion taxes would have done yielded a whopping 35% difference.