Nov 27

I only have $5000 in traditional, and want to roll it over now because i’m taxed in the 15% tax range. And when i but it in a roth ira, it’ll be tax free when i take it out when i retire. Verses the traditional ira, which would be taxed at a higher rate when i retire in 20 years, ( that is if i’m in a higher tax braket). Does this sound like a smart thing to do?

2 comments so far...

  • badgerboise Said on November 27th, 2009 at 6:49 pm:

    Rolling it over to a Roth IRA is a fine idea to prevent being taxed on future earnings. However, bear in mind that if the $5000 you presently have in the traditional IRA was deposited as a tax exempt, you will be required to pay the tax on that amount in the year you roll it over. If you do a rollover, it is easier if you do not let the money pass through your hands in making the transfer. That way if a snag occurs, you are not responsible for any penalties or taxes.

  • v b Said on November 27th, 2009 at 7:32 pm:

    I use the rule that if I’m in a 15% tax bracket or less, I move IRA money…if I’m in the 25% bracket, I don’t.

    I’ve seen many retirees have *higher* tax rates in retirement than they do in the years before….

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