Traditional versus Roth IRA

**disneysteve** · 08-06-2014, 10:54 AM

There was recently an article somewhere (Money magazine I think) that showed that a Roth wins out in virtually every case regardless of your current or future tax bracket. The exception is for folks who are starting later in life, like 50+. Otherwise, the Roth is always the better choice.

So if you qualify, I'd go for the Roth.

**EconoMutt** · 08-06-2014, 11:15 AM

Originally posted by disneysteve View Post

There was recently an article somewhere (Money magazine I think) that showed that a Roth wins out in virtually every case regardless of your current or future tax bracket. The exception is for folks who are starting later in life, like 50+. Otherwise, the Roth is always the better choice.

So if you qualify, I'd go for the Roth.

I'd agree that if you are younger you should go the Roth route.
I'm in my 50's so it's a harder choice. I make too much to contribute to a Roth, so I thought converting may be the way to go.

**disneysteve** · 08-06-2014, 11:31 AM

Sorry. I misread the question.

If converting bumps you into a higher bracket, it may not be worth it. There are some online conversion calculators. I'd run the numbers and see what you come up with.

**EconoMutt** · 08-06-2014, 11:41 AM

Originally posted by disneysteve View Post

Sorry. I misread the question.

If converting bumps you into a higher bracket, it may not be worth it. There are some online conversion calculators. I'd run the numbers and see what you come up with.

Thanks

I'll run the figures. I think it will be a close call either way.

**MakeAStash** · 08-06-2014, 08:03 PM

Paying the tax when the rate is lower always maximizes what you have left after tax. If you will be in a lower bracket later, do the conversion to Roth later.

**autoxer** · 08-07-2014, 05:30 AM

Originally posted by EconoMutt View Post

Thanks

I'll run the figures. I think it will be a close call either way.

I've been thinking about doing a partial conversion that would bring me right up to the next tax bracket, but I also have some more research to do. There is an interesting strategy that I don't fully understand yet, but it involves re-characterizing back to a traditional if the assets lose value. I'm wondering if I should do the conversion in January and then in December decide if I want to keep it or re-characterize.

This article talks a little bit about the strategy: http://www.madfientist.com/roth-ira-horse-race/

**feh** · 08-07-2014, 05:46 AM

Originally posted by EconoMutt View Post

I am very interested in hearing opinions on Traditional versus Roth IRA's

I have a Traditional IRA. I am considering converting it to a Roth.

I am at the top of the 28% tax bracket.

If I convert any of the IRA to Roth, I will be paying 33% tax.

I'm projecting a 28% tax rate in retirement.

Do you think it's worth paying the extra tax today so I can draw tax free in the future?

Thanks

Rick

The rule of thumb is to wait to do such conversions until your income (and tax bracket) is lower. Paying 33% on the conversion probably does not make sense.

Traditional versus Roth IRA