Which is the more logical option?
So my retirement reps told me to roll my account w/ former employer to traditional ira because I will have to pay taxes on it if I roll over to a roth ira. His reasoning was am I able to pay taxes on $5000 now (which im not) or pay taxes on more than $100,000 in 35 years at retirement. He suggested the later. Which is more logical? Which will cost me more money? Right now Im in the 15% tax bracket but it may go down to 10% for 09 tax year.
I did plan on continuing to make monthly contributions about the same amount as the monthly payroll deduction when I was with previous employer. Around $200-$300/mo
- Anonymous1 decade agoFavorite Answer
Here are some good rules of thumb on converting to a Roth.
■Generally you shouldn't convert to a Roth IRA if you need to hold out some of the IRA money to pay taxes on the conversion and you'll pay the 10% early distribution penalty on the amount you hold out.
■If your retirement tax bracket will be 15%, avoid paying 25% or higher on your conversion. Remember that a partial conversion may permit you to avoid pushing into a higher tax bracket in the year of the rollover.
■If your traditional IRA contains mostly nondeductible contributions, converting it to a Roth IRA should produce handsome benefits.
■Even if all contributions to your traditional IRA were deductible, converting it to a Roth IRA may produce benefits if the first two points above don't apply.Source(s): http://www.fairmark.com/rothira/thumb.htm
- David ZLv 71 decade ago
i would pay taxes now and let it grow tax free from now.