Comments on: Roth IRA Conversion http://www.consumerismcommentary.com/roth-ira-conversion/ A premier personal finance blog, established 2003. Within, Flexo discusses his own experiences with money, and he and other authors comment on a wide range of personal finance topics. Sun, 12 Feb 2012 20:01:44 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Britt http://www.consumerismcommentary.com/roth-ira-conversion/comment-page-1/#comment-198529 Britt Tue, 22 Sep 2009 20:32:06 +0000 http://www.consumerismcommentary.com/?p=7224#comment-198529 Excellent post! In regard to the Roth IRA income limits, you state: “But there is now a law that will help you get around this for a short time.” However, I don’t think it was made clear to most readers that the law change on who can and cannot convert essentially eliminates the income restrictions on contributions. Since income limits in regard to a Traditional IRA only apply to deductible contributions, high income earners who are ineligible to make direct Roth IRA contributions can make non-deductible contributions to a Traditional IRA. In 2010, when the income restrictions on Roth IRA conversions (currently $100,000) disappear, those same high income earners can convert the Traditional IRA to a Roth IRA, and they’ve effectively made Roth IRA contributions! Excellent post!

In regard to the Roth IRA income limits, you state:

“But there is now a law that will help you get around this for a short time.”

However, I don’t think it was made clear to most readers that the law change on who can and cannot convert essentially eliminates the income restrictions on contributions.

Since income limits in regard to a Traditional IRA only apply to deductible contributions, high income earners who are ineligible to make direct Roth IRA contributions can make non-deductible contributions to a Traditional IRA. In 2010, when the income restrictions on Roth IRA conversions (currently $100,000) disappear, those same high income earners can convert the Traditional IRA to a Roth IRA, and they’ve effectively made Roth IRA contributions!

]]> By: Shawanda http://www.consumerismcommentary.com/roth-ira-conversion/comment-page-1/#comment-197575 Shawanda Sat, 22 Aug 2009 18:10:41 +0000 http://www.consumerismcommentary.com/?p=7224#comment-197575 I also like the Roth 401(k). Although your employer has to offer this type of account in order for you to take advantage of it, you're not subject to income limitations if you'd like to participate. You can always try to convince your employer to offer the option. Especially if there are a decent enough number of employees who'd be ineligible to participate in a Roth account otherwise. "If you have a higher tax rate now than you will in retirement, the Traditional IRA is a good choice." I'm glad you mentioned this here. I hear a lot of financial experts making blanketed statements about a Roth being the superior retirement account. If you're a high income earner nearing retirement and you've accumulated little to no assets, then there's a pretty good chance your income is going to be lower when you retire. And as a result, your taxes will be too. I also like the Roth 401(k). Although your employer has to offer this type of account in order for you to take advantage of it, you’re not subject to income limitations if you’d like to participate. You can always try to convince your employer to offer the option. Especially if there are a decent enough number of employees who’d be ineligible to participate in a Roth account otherwise.

“If you have a higher tax rate now than you will in retirement, the Traditional IRA is a good choice.”
I’m glad you mentioned this here. I hear a lot of financial experts making blanketed statements about a Roth being the superior retirement account. If you’re a high income earner nearing retirement and you’ve accumulated little to no assets, then there’s a pretty good chance your income is going to be lower when you retire. And as a result, your taxes will be too.

]]> By: Gene South http://www.consumerismcommentary.com/roth-ira-conversion/comment-page-1/#comment-197542 Gene South Fri, 21 Aug 2009 19:07:10 +0000 http://www.consumerismcommentary.com/?p=7224#comment-197542 Yes, as you say, "the government really would like that income." Then why doesn't the government completely stop the traditional 401K and IRA, and only offer the Roth versions? Then they wouldn't have to wait at all for any of "that income." The reason is that with the traditional retirement accounts we end up paying high ordinary tax rates on years and years of capital gains and dividends. Very wealthy people like Dick Cheney, with most of their income outside retirement accounts, get favorable federal tax treatment on their capital gains and dividends. Maximum 15%. So the government is willing to wait... and the little people get screwed. Dick Cheney is laughing all the way to the bank. Yes, as you say, “the government really would like that income.”

Then why doesn’t the government completely stop the traditional 401K and IRA, and only offer the Roth versions? Then they wouldn’t have to wait at all for any of “that income.”

The reason is that with the traditional retirement accounts we end up paying high ordinary tax rates on years and years of capital gains and dividends.

Very wealthy people like Dick Cheney, with most of their income outside retirement accounts, get favorable federal tax treatment on their capital gains and dividends. Maximum 15%.

So the government is willing to wait… and the little people get screwed. Dick Cheney is laughing all the way to the bank.

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