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Old 05-20-2008, 12:15 PM
noppenbd noppenbd is offline
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As you can see, there are many fine points on the decision between Roth IRA and traditional, many of them dealing with unknowable answers (what will tax rates be in the future, what will your income/expenses be in the future?).

That is why many would benefit from practicing tax diversification. The idea is that if you are already putting money away pretax (401ks, SIMPLE IRAs, SEPs, etc) than putting additional money into the Roth is a good idea, because you will have flexibility at retirement. This can be accomplished through Roth contributions or converting traditional IRAs to Roths, as Jim suggested.

Personally I find it difficult to believe that significant amounts of traditional IRA monies will be able to be converted to Roth while staying in 15% tax bracket. Part of the problem is that many deductions that help people stay in the 15% bracket will disappear as they age (mortgage interest, student loan interest). Incomes tend to rise as well, making it harder to stay well below 15% bracket.
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