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 Post subject: Roth IRA Conversion in 2012
PostPosted: Mon Apr 30, 2012 12:13 pm 

Joined: Mon Apr 30, 2012 12:03 pm
Posts: 1
We read about the importance of doing a Roth conversion in 2010 and have been doing a little bit each year. The article that got us started was:
Roth IRA Conversion 2012: Are You a Good Candidate?

But this was the one I was most amazed by:
http://www.marottaonmoney.com/roth-ira-conversion-2012-roth-calculator-for-mr-average/

Is anyone else doing Roth conversions? Should they be invested differently?


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 Post subject: Re: Roth IRA Conversion in 2012
PostPosted: Mon Apr 30, 2012 12:55 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5333
Does anyone really thing THIS Congress is going to increase taxes next year by letting the lower rates expire? Not me!

But even if they do there is a simple way around this. If you accumulate some after-tax money in regular accounts then when you retire you live off that (tax free) for a year or two while you convert at much lower tax brackets. Basically, by living off regular accounts you can keep your AGI very low so that you pay taxes at the lowest rates. You do end up paying taxes at your current rate on the income you stash away in regular accounts but that is no worse that doing a Roth conversion now.

This is not MY idea...this is the standard way to minimize taxes.


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 Post subject: Re: Roth IRA Conversion in 2012
PostPosted: Mon Apr 30, 2012 4:14 pm 

Joined: Mon Feb 07, 2011 6:33 pm
Posts: 1135
Location: Illinois
I do a conversion every year and will continue to do so until it is no longer allowed (Nondeductible IRA contribution -> immediate conversion)
DoingHomework wrote:
Does anyone really thing THIS Congress is going to increase taxes next year by letting the lower rates expire? Not me!

I think it is much more likely that they'll do nothing (except encourage sensationalist "news" stories about the uncertainty) until after the election. At that point, your guess is as good as mine.


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 Post subject: Re: Roth IRA Conversion in 2012
PostPosted: Mon Apr 30, 2012 8:02 pm 
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bpgui wrote:
I do a conversion every year and will continue to do so until it is no longer allowed (Nondeductible IRA contribution -> immediate conversion)
DoingHomework wrote:
Does anyone really thing THIS Congress is going to increase taxes next year by letting the lower rates expire? Not me!

I think it is much more likely that they'll do nothing (except encourage sensationalist "news" stories about the uncertainty) until after the election. At that point, your guess is as good as mine.


I think you are right about nothing happening until after the election. But if there is a power switch they'll vote tax cuts while they can. If there is no switch then I think they will vote tax cuts to justify spending cuts. Either way we get the same rates next year.

Why do you put money in a Roth? Are you in a low enough tax bracket that it makes sense?


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 Post subject: Re: Roth IRA Conversion in 2012
PostPosted: Mon Apr 30, 2012 9:18 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1818
DoingHomework wrote:
Why do you put money in a Roth? Are you in a low enough tax bracket that it makes sense?

In my own case, we make enough that we're phased out of getting a tax break on a traditional IRA. So we put money into a non-deductible IRA and convert it to a Roth. Since I can't get a tax break for money going in, I might as well go for one on the money coming out.


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 Post subject: Re: Roth IRA Conversion in 2012
PostPosted: Tue May 01, 2012 3:27 am 

Joined: Mon Feb 07, 2011 6:33 pm
Posts: 1135
Location: Illinois
DoingHomework wrote:
Why do you put money in a Roth? Are you in a low enough tax bracket that it makes sense?

VinTek wrote:
In my own case, we make enough that we're phased out of getting a tax break on a traditional IRA. So we put money into a non-deductible IRA and convert it to a Roth. Since I can't get a tax break for money going in, I might as well go for one on the money coming out.


Same reason I do it. I can't get the deduction for TIRA contributions, so I make the nondeductible and immediately convert to a Roth. There's no tax on the conversion, since my basis is the nondeductible portion of the account (which is all of it).


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 Post subject: Re: Roth IRA Conversion in 2012
PostPosted: Wed Sep 12, 2012 11:19 am 

Joined: Wed Sep 12, 2012 7:33 am
Posts: 43
I, and Suze Orman agree, that taxes in general over the next several years have no where to go but higher. So perhaps, for some, locking in taxes now makes sense. I always assumed I could make contributions to my tax deductible qualified plans then take withdraws once I returned and had no or very little income. I assumed that the tax bracket I would be in then would be a better option then booking anything now.

One thing that gets neglected, and you can see it by this thread here, is what you DO with the money you invest. We can all make the best decisions tax wise out there but if you buy the wrong assets at the wrong time it will all be for not.

-Goldberg Financial
You Can Follow My Blog About Investment Options: http://financeinlife.blogspot.com/2012/09/there-are-so-many-other-options-than.html


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 Post subject: Re: Roth IRA Conversion in 2012
PostPosted: Wed Sep 12, 2012 11:23 am 
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GoldbergFinancial wrote:
One thing that gets neglected, and you can see it by this thread here, is what you DO with the money you invest. We can all make the best decisions tax wise out there but if you buy the wrong assets at the wrong time it will all be for not.


True. That's why everyone should have the bulk of their money in very low expense index funds with Vanguard or similar reputable, low-cost family. By far the most important thing every investor can do is to keep expenses and fees as low as possible.


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 Post subject: Re: Roth IRA Conversion in 2012
PostPosted: Thu Sep 13, 2012 9:06 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1818
Goldberg advocates http://financeinlife.blogspot.com/2012/09/stocks-up-big-todaya-perfect-day-to.html

I don't know why nobody ever thought of this before. It's staggeringly brilliant. Silly me. All I've done is amass a sizable portfolio by dollar-cost-averaging through the years and rebalancing annually. I should have been doing this all along:

GoldbergFinancial wrote:
This is why my investment approach purchases high quality blue chip stocks when the market is in an uptrend and sells out of these investments when the market is topping out. The money is reinvested in other assets like Treasury Bonds, Real Estate, or Gold, etc at that time and then rotated back into the market once the sell off is over. In this approach you are never the victim of large market crashes.

I should have been buying low and selling high! Oh wait, isn't that what rebalancing does?


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 Post subject: Re: Roth IRA Conversion in 2012
PostPosted: Fri Sep 14, 2012 12:54 pm 
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Joined: Wed Sep 23, 2009 9:01 am
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VinTek wrote:
I don't know why nobody ever thought of this before. It's staggeringly brilliant. Silly me. All I've done is amass a sizable portfolio by dollar-cost-averaging through the years and rebalancing annually. I should have been doing this all along:

Shhhh! It's a secret.


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