IRA to Roth Conversion

18 12 2009

So one of the big tax questions for 2010 will be do I convert my IRA over to a Roth IRA?   Well to put a broad yes on everyone will not be the right answer and maybe the decision made will not be the right one.  There are a lot of factors to look at!!!!  First, what is the tax being imposed on the conversion.  Second, how long do you have till you have to withdraw the funds.  Third, what do you think the tax rate you will be in when you are withdrawing the funds.  Fourth, what do you think the growth of your portfolio will be over the time frame you have.   Fifth, do you have the personal funds available to pay the tax on it.   These are some of the questions you must ask yourself, your financial advisor and your accountant.

I for one believe the govt will be happy to take your money in 2010 with the higher tax rates being imposed on the money.  More money in, more money to spend.  I also believe you can not determine the future tax rates and what your income will be at that time.    So to answer the question of do it or not will be a educated guess in some cases…

As for my choice in the matter of funding the govt now or later I prefer neither.   I prefer to be able to keep what I invest and earn on it because it was a decision I made, not the govt.  not anyone but myself.   I have become a cynic on political matters as they spend like they have the money to spend.    I have become disgusted by the discussion of raising the credit limit (in govt terms the debt ceiling) for themselves.  The individual must learn to live within their means while the example lives outside.   The individual is told to watch their carbon footprint on the world while the govt has 747 and 757 flying the politicians around.  If you want to make a difference, let your actions prove it not your words.

So to get back on the Roth Conversion must suggestion would be to look at all factors before rushing into the conversion.




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