tag:blogger.com,1999:blog-3581663052623563699.post4126003770275022067..comments2023-09-11T22:06:20.135-04:00Comments on 2 Much Cents: Roth vs. TraditionalTomhttp://www.blogger.com/profile/17311160336877082020noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-3581663052623563699.post-26508568620535215202012-06-05T12:29:34.883-04:002012-06-05T12:29:34.883-04:00You are correct that high-income taxpayers can ess...You are correct that high-income taxpayers can essentially make Roth IRA contributions by contributing to a Traditional IRA and then converting it to a Roth. While this can be an effective strategy in some cases, it is not always a winner if you have additional Traditional IRA assets beoynd your current year contribution. This is because of a pro rata tax rule that basically requires you to ratably pay taxes on your entire Traditional IRA account's earnings when you convert, not just the taxes on your current year contribution. In English, check with your CPA or financial planner before you think about implementing this strategy. It's doable, but not as simple as you might think.<br /><br />For a more detailed example, you may also find this article helpful:<br />http://www.forbes.com/sites/ashleaebeling/2012/01/20/the-serial-backdoor-roth-a-tax-free-retirement-kitty/<br /><br />Thanks for the compliment. I do my best to provide advice that is actually helpful and won't put you to sleep.Tomhttps://www.blogger.com/profile/17311160336877082020noreply@blogger.comtag:blogger.com,1999:blog-3581663052623563699.post-31630093362331233762012-06-05T11:55:04.797-04:002012-06-05T11:55:04.797-04:00Tom, I've read that you can still slip money i...Tom, I've read that you can still slip money into a Roth IRA if your income is above the maximum allowed by putting it in a Traditional and then converting to a Roth. This will allow your earnings to be tax-free. Do you know anything about this? I enjoy reading your blog because it brings humor to a boring subject.The Brock Familyhttps://www.blogger.com/profile/00926389136062693336noreply@blogger.comtag:blogger.com,1999:blog-3581663052623563699.post-67468019352177639732012-05-08T13:34:58.498-04:002012-05-08T13:34:58.498-04:00I have heard rumblings of your fear as well, but I...I have heard rumblings of your fear as well, but I would not worry too much. Making Roth IRA earnings taxable would require years of transition as certain income tax laws would have to be repealed and alternatives would have to be passed. I would also offer that it would be much easier for Congress to make tax rates in the future higher than they are now. That would actually make a Roth IRA more attravtive as you would be paying lower taxes on Roth IRA contributions now as opposed to higher taxes on Traditional IRA contributions and earnings in the future. Like you said though, I wouldn't begin to claim to know what Congress is and is not going to do!Tomhttps://www.blogger.com/profile/17311160336877082020noreply@blogger.comtag:blogger.com,1999:blog-3581663052623563699.post-91628111331229015372012-05-08T12:47:13.651-04:002012-05-08T12:47:13.651-04:00Good advice, Tom! One more thing to add.. there a...Good advice, Tom! One more thing to add.. there are some overly cynical, paranoid people (ie, me) that think its possible that the government will end up deciding many years down the road to start taxing Roth IRA earnings. Who knows what will happen, though!Kelly Newmanhttps://www.blogger.com/profile/02215321911510326607noreply@blogger.com