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10-20-2008, 12:58 AM
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#1 |
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Registered User
Join Date: Oct 2008
Posts: 1
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IRA to roth conversion?
I'm planning to convert part of my IRA into Roth since the value of stock is so low, I might just pay taxes now. I'm 39, and I'm at 25% tax bracket. I was planning to convert all I can before switching to the 28% tax. I'm a resident of CA so I have 9.5% on top of that. I'm asking for suggestion and if this is a good idea or not? I understand I need to come up with the money to pay taxes, and I have that (but I just could invest that money in the market).
Suggestion? Thanks and sorry if this is too basic question, Ferrari |
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10-20-2008, 06:00 PM
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#2 |
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Registered User
Join Date: Oct 2001
Posts: 1,586
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Ferrariwin,
I think you have a great idea, and the timing is right. Converting from a TIRA to a ROTH IRA now will give you tax free growth until age 59.5 or beyond. Investing your savings is also a good idea, but you will be paying tax on your gains every year. Or you could get to deduct your losses. A single filer with taxable income of up to $78, 850 will have a top tax rate of 25%. Filing MFJ with taxable income of up to $131,450 will have a top tax rate of 25%. |
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10-22-2008, 02:18 AM
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#3 |
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Registered User
Join Date: Aug 2008
Location: USA
Posts: 27
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Another advantage of the Roth IRA is that it has no required minimum distributions. If you convert a IRA to a Roth IRA, you have to pay income tax on the entire amount at the time of conversion. Your tax advisor can help you weigh the costs and benefits of a conversion for your specific financial situation.
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10-22-2008, 05:40 PM
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#4 |
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Registered User
Join Date: Mar 2007
Location: Ohio
Posts: 324
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If you are going to retire outside of CA, you can probably save the 9.5% state tax by waiting. Don't be in a rush to convert at 25% tax bracket unless you expect to earn LOTS of money in coming years and retire to the same lifestyle.
Life has a funny way of rewarding patience. You might have a year where you lose a job and are in a much lower tax bracket. I would wait for that opportunity.
__________________
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