Whos There: Miss Iras Back

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So, your contribution limit is the lesser of:. Who can contribute to a Roth IRA? However, you can still contribute to save on a tax-deferred basis for retirement. However, for , you must report the conversion income you received in two installments in and If you made a Roth conversion in , you must report half of the amount. Do this on your and returns by filing Form Some IRA accounts have annual fees, while others have no fees.

Traditional IRA fees are a miscellaneous itemized deduction if they are both:. If so, you can deduct these expenses. However, by having more than one account, you might also pay multiple trustee and bookkeeping fees. You can move your money around to take advantage of changes in the market or in your investment philosophy. However, you must follow certain rules.

Some financial institutions might impose early withdrawal penalties on investments Ex: They can do this even though you roll over the investments. From cash income to bartering, these tax tips will help. Bitcoin, Litecoin, and the like leave many wondering how to classify this new form of investment.

Have you recently earned Bitcoin income from rising stock value? Have you found yourself wondering how the IRS classifies Bitcoin? Our tax pros discuss relevant IRS Bitcoin law and notices. Check the box below to get your in-office savings. I am not a robot. This link is to make the transition more convenient for you. You should know that we do not endorse or guarantee any products or services you may view on other sites. No matter how you file, Block has your back. File Online Make An Appointment. The government has always found a way to screw the middle class.

First they get their support to get them into power. Once politicians are in power, then They walk back on their promises. People should remember several things about taxation of social security. Not that long ago none of the benefits were taxable. Then a genius in Congress stated that half the money was from the employer and thus should be taxable!! Congress can do anything it wants.

Yes the gov finds a way to screw us. Right behind them are the financial advisors, always spouting contradictory data to make no one actually thinks they could rise above their station by investing. They are the apostles of averages, which the wiser of us know are highly informative and interesting, but lie to us nonetheless. Freedom to make future decisions without government interference. My investments are no where near average.

I made a big bet 20 years ago that though theoretically riskier than mutual funds, all considered looked no riskier than the ones of which FA approve. ROTH is a wonderful vehicle for people like me where required minimum distributions would be an absolute catastrophe. If only that were so life would be simpler, and more boring and less meaningful.

FA seem to think having a large portfolio as a problem, not a goal, unless of course you make a very high income. Then, I suppose, they consider you fully entitled to one. In that case, as I guess the story goes, you must know how to handle a large portfolio. FA seem to think the world is such that the winners of the payroll income lottery should end up with the most money.

This anti-ROTH thing is absurdly biased. I would stake everything I own on it. Oops, maybe you should stick to your day job! Under the Tax Reform, tax rates went down across the board. Also, the standard deduction doubled. The middle class will end up paying less taxes in than when you wrote this in Only because cheeto is a fucking idiot. That is why you really are not saving much on taxes compared to your k or Traditional IRA. Also there are no required distributions. You can pass it on to your children.

That was the deal only to tax it once. If your doing the K it make sense fot you to have a Roth consider it a tool inyour tool bag…. Sometimes I think you post stuff like this just to entice contradictory comments. You did make a good point though about possible death before retirement. I would add that tax laws could change in the future, such as a consumption tax replacing the income tax. That would really screw all the future tax savings in a Roth.

For folks like me though, the Roth absolutely makes sense. Assuming tax laws stay the same and I live well into my golden years, the tax free growth on all of the compound interest over that time period will be worth it. This also assumes I will earn a good rate of return on my investments over the years, and I will. So the math is not the same. However, tax diversification is important because there is a minimal amount of income that is not taxed in our current rate and probably future rate scenarios. You want to max out that first part of the effective rate calculation with taxable income at those lower brackets.

There are two factors that affect this: Which is what a Roth IRA does. What if Sam has 3 kids and they each have 3 kids and now he has 9 grandchildren living in CA? Additionally, you gloss over the fact that you are eliminating uncertainty when you choose a Roth. You have locked in your tax rate, an no longer need to worry about whether taxes will go up. You have a lot of good points, but it seems you are focused on spiting the government, not helping people have the most available for retirement.

Tax rates will almost certainly be lower in retirement. Calculate how much capital you need to generate your current income. Those two things along with the fact that the rate on my income is going to rise back to 15 from 12 percent make it highly likely that my tax rate will be the same or higher in retirement. That means potentially higher future tax rates at all income levels. Saying tax rates will be lower in the future is a guess, at best.

Eight Pitfalls to Avoid With an Inherited IRA

Once that point is understood the rest of his post whether you agree or not starts to make sense. You sure about that? Yes, you can withdraw your contributions from your Roth any time you wish. There is no penalties for doing this. Key word is Contributions though. You were already taxed on the money prior to contributing to your Roth, so you cannot be taxed on withdrawing your contributions.

Yes, you can take out contributions tax and penalty free. Key word is Contributions. That money has already been taxed and cannot be taxed again. You cannot be penalized for taking out your contributions. All of those non-penalized things in your list only deal with the non-contribution money in the Roth.

Not all of the unqualified distributions are taxable, as long as you withdrawal below the basis, which your total Roth IRA contribution, your withdrawal is tax and penalty free at least it worked out that way few years back when I actually went through the IRS worksheets. However, once you start to dip into the earnings it is a whole different story.

I also cannot vouch for the non-qualified distributions on the converted Roth accounts since the tax treatment on these might be different. Assuming you made money from the investments. I am just starting to contribute to a Roth, But my main retirement is my k. Everybody knows that the government sucks at efficiency of money, any person with a little common sense could spend the taxpayers money more efficiently. Like you I am a fan of smaller government.

I contribute to both my and a Roth because I want a little diversification in my retirement. That and I hate my k broker, its pretty limited on what I can trade. No options or anything like I can trade in my Roth. Are you maxing out your K yet? This simply gives you the option to pay taxes now vs. Let me spell it out:. OR 2 You invest now, pre-tax, and pray that the gov. So Option 2 is less desirable from that standpoint. If you are indeed a student, then just give it time. The more you make, and the longer you are in the working world, the more you will realize how inefficient the government is.

When you pay little to no taxes, of course the government is great. I never said the government was great. In fact, I said the gov. The question is whether they waste your money now, or waste it later. Since I expect the gov. Nope, not maxing out my k yet. I told you why I opened my Roth, I want more investment options than my k can provide. My broker sucks. I understand that I could invest in a traditional IRA and get the tax benefits now. But I would rather pay the taxes now, and yes that means giving more money to the government now, than get taxed on it later in life.

Taxes could be way higher when I retire, or they could be way lower. It is good to hear you and others are so willing to contribute for the betterment of us all. Also, it is good you want more investment options. Whether you are market savvy or not, more options are generally better than less. Deferring taxes is just as good as not paying taxes until you have to pay them!

Do you feel the goverment will spend your money more efficiently when you take it out of your k and have to pay taxes? Is that a joke? Matt, thank you for making me believe in Social Security again! Which is what debtntaxes was saying. But as taxes went up they realized that if most people had to write a check for hundreds if not thousands of dollars at the end of the year there would be a tax revolt.

There was a great npr planet money podcast on when the government started taxing citizens on income. You guys should check it out. My thought is that by creating a mix, when I begin relying on this money after retirement I can orchestrate my tax liability at that time. And perhaps it also helps me hedge my bets a bit in reference to moves the government may or may not make in the future. Sure, a mix is good, and better than NOT saving. I agree — giving any money to the government before you absolutely have to is ludicrous. I am torn though between that and giving the government control of my money savings overall.

The thing that bothers me about the traditional IRA is that the government is forcing me to wait until I am I really think we need to keep our money away from ourselves. Stick it to the government then by maxing out your k, retire 5 years early and rollover k a year when you are at a low tax rate! Or rollover when your spouse takes time off for a baby, or any numerous other situations when your income is reduced.

Great opportunities to rollover! The fallacy here, for many, is that most people will NOT make more in retirement than they do while they are working. In fact most people will make less, and therefore the tax bite would work the other way. I want as many different kinds of retirement savings as I can have. When I had income property, it was another one.

I do not think you can ignore a choice. Is this a case of Roth IRA envy? Come on Sam, tell the truth. If you were not ineleigible, you would take advantage of it. Yes, I hate discrimination and these arbitrary income limits the government imposes on who can and cannot contribute to their retirement. I feel bad for the thousands of people who are giving the government more of their hard earned money. I only wish more people could read this article with an open mind before contributing. I wrote a post on RothIraMovement that says a lot of the same things. Whatever happened to people just saving their money.

Why are special government accounts required for every need? Due to the income limits, contribution limits plus all the rules and interactions with other accounts, it hardly seems worth the trouble. More taxes up front thank you very much! My employer has a good matching plan which has really helped my total balance add up nicely. Can someone explain why maxing out my k or in my case, a b would be better than only contributing some money to my b, but putting the rest in an IRA? However, even then, you have no idea.

Disadvantages Of The Roth IRA: Not All Is What It Seems

The big risk is Big Government and ever changing tax laws. Because you can typically get better returns in an IRA that you manage vs the limited options available in the company k. You lost me at: If my choices are either: Maybe not enough to retire on alone, but nothing to sneeze at! You highlighted the contribution limit for single filers only several times but not couples. Most American families as you can imagine, are eligible to contribute.

Please explain to me why you think the government will assault the middle class at their own detriment to stay in power? I hate sexual discrimination. The 10 year yield has gone down for 40 years in a row, and anybody who can claim with interest rates will be in years is fooling themselves. I thank you for your extra taxes to our country!

People loooove big government and are easily swayed. Seen the austerity measures in Europe lately? I say it will not. I know you live in big bad silicon valley and all that, but in most of the country I make a pretty good living. They are too important for politicians to meddle with. The year yield is at 2. Why am I spotting you 0. Not rich, but not bad at all. The real problem with American people it that they want big government BUT they do not want to pay for big government.

What did we decide to bet Darwin? At least offer something and admit defeat. Welchers are the worst. Sam, is Darwin the one who always talks about how the Republicans will with the presidency because the economy is so bad, and when you asked him to bet, he decided not to? Is that the guy? Darwin is indeed a tough one to get money out of! Please provide these purported claims. You make some great points. What if the government decides to tax the Roth in the future? There is nothing stopping them from doing so. The thing that would stop them is that it would hurt the middle class, the ones that are able to contribute to a ROTH.

You have made the argument several times on this page that the future tax rates on middle class income will most likely not increase because that is the class that has the strongest voting power. Which is why anybody who contributes to a Roth in fear of higher taxes is seriously misinformed. You misunderstood his comment. His point was that the government would never tax the Roth because it would hurt the middle class. Does this not follow the logic of your assumptions?

That was exactly what I was getting at. The Roth would have an after tax value of that amount, but the others would be worth 1-T with T being your tax rate. I hope that is coherent enough to get the idea across. While that is true, what are the odds you will have higher income in retirement than your highest earning years? So if you take that away, then rates have to be increased across the board, rather than you jumping up a rate.

As long as we get to vote, we will never vote for someone to increase our tax rates. Good luck generating capital 50X your average annual lifetime income at that rate! The point of investing is to have a majority of your money come from the interest not your contributions. So the traditional IRA taxes that too, the majority of the money you made for retirement??? First off, a Roth is fine for someone in the lower tax brackets.

Plus, in retirement, you can move to a state that will not tax your retirement benefits. So you could be getting the same tax-free treatment by the state for your trad. IRA as you could had you contributed to a Roth. Also, your income will most likely be much less in retirement, so you will very likely be at a lower tax bracket.

Holly, I think you just reiterated everything I just wrote in my post! Thanks for your thoughts though! Enjoyed this post, FS! Why would you say that it is doing nothing for you? The wisdom of whether or not to invest in a Roth is now in your rear view mirror. I would suggest that pulling your money out would be a major error. Why not invest wisely and let it grow tax free? You might be right Evan! Managing Ks and IRAs are big business! Fidelity and Vanguard are cleaning up.

Evan, bad idea on maximizing the Traditional and then the k. Well it is even more complicated than that. If you are a covered employee things even get a bit more complicated on deductible IRA Contributions, I was just making an abstract point on the k fee issues while agreeing with Sam about the Roth. I wonder if by throwing social security into the mix, your conclusions would be different. It would seem that if one had a large traditional IRA and was taking distributions, those distributions would be taxable, and if the amount was sufficient enough, it would make at least a portion of the social security taxable as well.

That would not be the case if one had instead, that same amount in a Roth IRA. However, the federal tax rates are at their lowest level in more than 50 years. I think the tax rates may go up in the future when US economy is getting better. I think contributing to Roth IRAs make more sense to young people. Roth IRAs can be served as a buffer. I always want to save more for retirement besides k , but I afraid that I may need that money later on.

Indeed, I have an emergency fund that covers 6 months living expenses, and regular online broker account with few thousands dollar in it. It should be better than cashing out from k or traditional IRA. You bring a good viewpoint on your fear of your money being locked up in your K. You can borrow from your K at an interest rate you pay yourself back at. If you have a 6 month EF, you should be fine.

Unemployment benefits in America are pretty good! Of course, if he decided to quit his job to open up that new business, the ability borrow via the k is gone. Also, if he borrowed from the k while working at that job to start up a side gig, and then later decided to quit his job to pursue his dream and still had an outstanding k loan balance, and was unable to repay that loan, then that entire loan amount would immediately be classified as a distribution and taxes and assuming he is under And those numbers can be a bit brutal. Sam, I agree with you that Uncle Sam knows how to get your money now or later.

If you do math, you will see that the compounding power of after tax money can make you rich in years. Remember, you squirrel away only 5K and assume as if it never existed. You make a compelling argument, Sam. Will help a young person to learn how to invest their money. The Roth IRA has its downfalls, but I still think it is a good tool for you to use in your retirement toolbox. Yes, good point about the K management fee, which is not clearly delineated how much.

But, these are both not bad choices. You can pay them now, or pay them later. Either way, they will be wasting our tax dollars. You are certainly in the minority — everyone out there is touting the benefits of a the Roth. Everything is just an opinion, ie you think taxes will not go up. I have no idea where taxes will go, so I use the Roth to diversify against this. With that being said, I think a k is often under utilized.

Once you pay taxes to the government, you can never get them back! At least with k contributions you are deferring your taxes until a later time. I read through all the comments and it seems like you really hate how the government wastes your money! I agree, but do you think this will get better over time?

You will have to pay taxes eventually right? I like your argument, but not sure it can be used in this case, or am I missing something? I have dealt with a number of people who, upon reaching They do not want nor need the money but must in order to avoid a penalty. If I am Wow, someone not drinking the Roth IRA kool-aid?

Imagine that in this blug-o-sphere. And I think having some diversification is nice. One point you missed about them being the same if tax brackets are the same at contribution and distribution is you have more money to invest if you go the traditional route. We did a whole post on this, and even have a spreadsheet you can see all the different options of where to put your money. Also, I agree with the tax rates on the middle class. We also did a whole post on how the tax system works and tax rates marginal and effective, before deductions back to I personally think it will go unchanged for the middle class.

But, we all get to decide for ourselves. I think Roth IRAs still make sense for high income earners since the income limit for conversion was removed in Conversion and contribution are different. Not sure I understand your comment. High earners are the only group that does well on Roth IRAs. First max out your k, including over 50 extra amount.

You will not get any deductions. Stuff it into a money market for a week. Then convert to your Roth IRA. You evade the income limits and get free in the future. The financial recession even helped out on my conversion of my legacy IRA. I converted at the valley in stock values, moving all the appreciation that subsequently occurred into the tax free side and paid very little tax at conversion. One advice note is high income earners need to avoid natural tendency to roll k to IRA after leaving firm.

That action limits benefits of conversion because you have to do a pro rata of all IRAs. My firm allows me to leave money in a non-IRA k type account, still invested. Still get to enjoy the tax advantages. I currently live in Texas where there is no state income tax, and it is very possible that I would move to a state with income tax after retiring all of my family is in PA.

Though ofcourse by then I may be really settled here. Still thinking through the post and comments. That is a good point. I would never give up Texas residency if I have established it. These are hardly middle class numbers. For the record I have both a k and a Roth.

I will have two pensions upon retirement and it is quite possible that my AGI at that time will exceed my current AGI. The Roth will allow me flexibility in how I take distributions and enhance my ability to control my overall tax burden. And if so, at what percentage does it make discrimination wrong? What I proposed, and stand by, is that a year out — say, April 9, , the 10 year will not be below 2. I stated a year out because you said nobody can predict the future. So you want me to spot you 22 basis points? Here is my initiat statement verbatim: My comment was March 30, so this would mean on March 30, , the rate is either over or under 2.

Obviously the odds are much changed in that scenario. Surely you can see the difference, no? Are you seriously still not understanding the difference? Let me put this in perspective of something you should understand. You cited the performance at the end of the year as evidence that your prediction was accurate, right?

If you said over under on 2. LOL Kept it simpler though. My tax site is more for beginners, so I wrote about contribution limits and deadlines. A Roth will be good for me. I max out my contributions yearly by saving half of my gross income and putting that in a K Roth and a Roth.

I have done the math.

Recommendations For Building Wealth

Tax rates are unknowable, but if either possibilities of 1: I have control of my personal savings and am already to the point to have been advised by my CPA tax man to buy Roths. I am proud to contribute to my country, I just believe in not over-contributing.

I think a Roth is good in certain situations. I managed to get quite a sum into my Roth without ever having to pay tax on the money because of the small amount of money I made during that time. When I went back to work full-time, I stopped converting because it no longer made sense because of the reasons you listed above.

I still contribute to my Roth currently, I make too much to get a tax deduction for a traditional. I will be using some of my extra income to go on some awesome trips in the near future though. Robyn, that is an excellent example of one of the many good uses for a Roth. You did the right thing. I find that the Roth is an excellent retirement plan account to supplement the 3 pillars of retirement income- K or other retirement plan , social security, and investment income.

Most of the 3 above spit out taxable income and can cause your social security to be taxed big bummer. By being able to withdraw tax free income and balance the other two, you can get more net income and pay less tax. To be fair to Obama, he had nothing to do with the lifting of the IRA conversion limit; that was done back in , by a Republican Congress under a Republican President. I have a question about this article.

How does the Roth K fit into this article, and what are your feelings about it for different ages and income levels? Thanks for taking my question. No job, no money. You provided me with some great perspectives and I wanted to get your input, if possible…. I agree with many of your statements, to the extent that they are intended for your target audience, which tends to earn well into the six figure arena as I understand it. In the current horrible economy, however, there are a large number of investment savvy, educated, hard working, low income individuals. After my various deductions, with the tax credit available due to my qualifying Roth contributions, my effective tax rate is in the low single digits.

It is reasonable to assume that in the future, my income will be many times greater than my current income. In the mean time, it makes sense to pay my near zero tax level on savings. I agree that my tax rate upon retirement is likely to be much lower than my tax rate at the peak of my career. It is unlikely, however, that my tax rate upon retirement will be as low as my rate now. For me, the use of a Roth IRA is very much about keeping my money out of the hands of the government. I make the bet that giving the government a a few points on the front end will save me from giving them many more on the back end.

In thirty years or so, I guess I will find out. Dan, thanks for your balanced response. Just a thought about what may be a significant difference between a Roth and Traditional. A traditional IRA and a k and a lot of annuities require you begin withdrawing at least a certain amount based off of your life expectancy. I found the article Sam: Those withdrawals are calculated by dividing the total IRA balance as of Dec. You use a separate life-expectancy table in the same publication if your spouse is more than a decade younger than yourself and your sole heir.

Some of your points are valid. Most are not, Roth k and k are not going to be the same. You are going to be taxed at different rates throughout your entire career. It does not take a genius to figure this out. True, assuming that tax rates remain the same, and that is very, very unlikely. The odds of taxes going DOWN by the time you retire? Not good, so better to pay the tax now, at a known rate, than risk paying rates 2x or 3x higher. They will advise a Roth if it is an option.

Locking in your tax-rate in retirement is an incredible option. The tax-free growth can be argued against with a time-value of money stance and the liklihood of a much weaker dollar, but the author does not even scratch the surface of the other benefits of a Roth incredible flexibility.

What would you prefer, a tax-free Roth or a taxable Traditional? The government and I want to thank you again for paying taxes up front to help our country. With such a big budget deficit, we need all the willing tax payers as we can! Spoken like a true Libertarian gold bug! See you in 4 years! Your anti-government brain is, to the detriment of your readers, drowning out your pro-investor brain! In all but the most unrealistic scenarios, 5k that grows to k in a Roth in 25 years is worth a lot more than if it grows in a Traditional IRA. I have a question. I am wondering if i should max out my k or start an additional ira.

Any help would be greatly appreciated as I am stuck on what I should do. I am wondering if its worth it to start a ira on the side from my k and max it out per year. My k is invested all in stocks. Non-Roth treats these items as the only tools in the retirement toolbox. Your arguments make sense for those who are under the cut-off limits but what if you can max out all of your tax-advantaged options? Roth conversions then provide you with some options:. I am still trying to grasp the complexities of having multiple retirement accounts but what about:.

This could impact the taxes on your social security and medicare premiums. Perhaps I am missing something, but I think there are opportunities to use the ROTH wisely when and only when your pre-tax plans have been maxed out. I personally am against the income cut off limit, and also would rather use the small sum of money to invest in something other than stocks and bonds, but myself and my life. This is more more unfairness creeps in. One advisor suggested I cherry pick items that have declined and I expect to return. Always a pleasure to have discussions with you sir!

Under current tax law, Roth k does not have any contribution restrictions. Effectively there is currently no income restriction. It depends on what you think all future tax rates are going to be. If you think income tax rates go up in the future e. Obviously if you think a lot of waste, fraud, tax expenditures will be removed and the tax rates go down, then a Roth would be worse off. You are ignoring the effect of the business cycle on account balances. It is tough to predict a recession before it happens, but the result is always the same — a drop in k balances.

It is easy to know when you are in the middle of a recession. You could have been off by a month and still pay a much lower overall lower rate. Of course the caveat here is that you have to be employed and pay the conversion taxes as a lump sum. Also you are ignoring the estate tax. Paying taxes on income now will reduce the amount in the taxable estate. Obviously, this is only needed for accounts with balances that are much higher than average accounts.

There is a contribution restriction for Roth k s: The catch-up contribution is the same as the Traditional. I played with mine this past year. After contributing a percentage to the Roth and recently concluding that it was not a good idea for me. As has been endlessly repeated in this thread, the math is the same assuming equal tax rates now and in retirement.

The people that deny that are at best being obstinate. Of course, that needs to be shifted down due amortization, I am just using that as an illustration. In states like California, they capture more of our money in fees, fines, state and local taxes anyway. Even in this economy, there are multiple state and local sales tax, and also property tax increases on the ballot. I think one big mistake I see people doing is confusing effective tax rates with marginal ones. I work overseas and and pay no Federal income tax.

Since I pay no tax up front. The next years may well continue stupid political bickering. Roth IRAs should remain one of the last vehicles that are grandfathered. Right now my ratio is about 1. So, instead of making a non-dedustible Traditional IRA contribution, it makes a lot more sense to make a non-deductible Roth contribution — at least my earnings grow tax-free! I have to pay the taxes upfront either way- why not reap the benefit of tax-free earnings and avoid paying Uncle Sam some more of my money? Actually last year, my earnings phased me out of making a Roth contribution too.

But I was not about to be cheated out of my tax-free earnings, so I made a non-deductible Traditional IRA contribution and then turned around and converted it to a Roth! As long as that loophole is available, I will be using it! The government recently removed the income limits for Roth conversions.

I agree with Jason, tax rates are going higher. Have you ever looked at historical tax rates? Current rates are amazingly low. Rates may not be headed much higher within the next two administrations, but I expect some reversion to the mean over the next years, and for people that are retiring in 30 years — you still have another 30 year time horizon. Roth is an excellent hedge. And we all know politicians at the federal level will never cut spending!!

Plus, I expect to have a six figure income within ten years of coming back out of grad school, so this is most likely the lowest tax bracket I will ever be in again. I believe a Roth is a good option for me. I am a 30 year old, highly educated low income earner. I fully expect that, with more experience, I will see my income grow by at least one order of magnitude through my career.

I work with a small company at the moment, which has no k plan. Due to the current state of my income, my taxes are negligible, and I can still take a tax credit for my roth contributions, which exceeds the benefits of deducting the money, and provides the added bonus of tax savings later. If you are in the lowest tax brackets and expect a decent increase in income, then go for it! Keep on saving and never deviate from the plan! I am a glass half-full optomist and will not do that. At a time when my wife and I were in the K range, we were putting in allotments every year.

I see no flaw other than my money being trapped til retirement. The Fed will get some obviously, but far less at least. As a CPA I am asked this question a lot. If you are going to be in a similar tax bracket after retirment than while working, then the Roth is the better deal. Remember, IRA distributions are taxed as ordinary income, not capital gains.

And to add to that misery, if you die, there is no step up in basis. You would have been better over never opening that IRA. The only way to lower your taxes in retirement where I am now is to have both types of savings Roth and non-Roth. That way you can lower your tax base in retirement and enjoy a lower tax rate. Ok, so I am fairly new at looking into my retirement and trying to figure out if my thinking is in the right direction. Given my current paycecks will be less by dollars per check it seems like it could be worth it.

So I will be tryiing to maximize my pretax dollars, more for me less for them, and maximizing my company match. Is my thinking way off or is this something I should consider. Again this is all somewhat new to me even tho I be my k for about 10 yrs now. I appreciate all articles on IRAs because everyone brings something new and interesting to help demystify all of this. But your article is extremely biased and opinionated, not saying its not true, but if you really want to help people and let them decide for themselves, then the ONLY way to do that is to be neutral and give all the facts, positive ones too.

Paying tax on now is MUCH better than paying tax on that principal in the future when it will have grown. Say it doubles every 10 years, then in 40 years I am young and have that long till i retire you will have tax free 20, to withdraw. So, pay taxes on now for tax free 20,, or dont get taxed on , and instead get taxed on 20, I doubt that explanation was needed, you get the point. Do you agree with this? If not, please explain your side more because I missed something and I really want to understand all this. Do the math and run scenarios to figure it out for yourself.

So even if you are in a much higher tax bracket now than in retirement, the Roth still makes more sense due to your not having to pay any taxes on any of the capital gains. The advantage of tax free growth in my opinion makes it a higher priority than simply funding a taxable brokerage account…. If you are maxing the K, and have the privilege to contribute to the IRA not everybody does due to income , then max it out! One of the most confusing articles recently read.

I can pass it on to my heirs tax free. First, I do agree that the limit on the Roth is dumb. The limit on the IRA only applies to you if you participant in a k- otherwise, there is no income limit. If you die, your screwed anyway- your dead. The family, your heirs, are screwed in a traditional IRA. The have to add the distribution they receive to there income, maybe pushing them into a higher tax bracket. In the Roth, you prepaid those taxes when you can most afford it, went your alive. The math is not the same for a number of reasons. The traditional IRA gives a false sence of net worth- there is alwaya a tax liability attached to the asset.

With a Roth, at least you know want you have and you can access in retirement without any tax liability. My income will be the same if I save properly and have a small pension. Planning to have less is planning to fail. Unfortunately there is an over-reliance on a very inefficient product. Balancing between taxable, tax free and tax deferred is the key. Paying the taxes now gives you a more predictable income in retirement. Whatever floats your boat Mikey.

But not paying taxes is better than paying taxes. While you made a number of valid points, what about the factor that you do not pay taxes on the growth of your Roth IRA? I get that the math is the same. But, if you are so keen on not giving the government your hard earned money, why are you so willing to pay them taxes after you spent so much time growing your tax liability to them? However, if you contribute that K in a traditional IRA and wait to pay taxes until you take distribution, sure, the net take home to you is arguably a wash.

But, your payment to the government in taxes has grown at the same rate as your investment. I think that both investment vehicles have uses and should be well understood in order to use as effective tools when planning for ones own retirement. I just think your argument about not giving the government money seemed silly.

Hence, all I can do is thank you for your patriotism and helping pay for my early retirement. We do need taxpayers to keep on paying to subsidize the rest of use who worked hard all our lives and paid taxes. Yes and yes; you and your wife can open Roths, but have to be under different account. You can open additional Roths for your kids if you have any. However, you can convert a pile of funds from your other IRA, but each starts a new 5-year waiting cycle.

In my limited understanding of Roth vs Trad; many here are missing on the following: In a Roth, all the gains are tax-free. You do not get a ST or LT cap gains deduction, so you essentially are taxed twice. In great contrast, your Roth earnings are not taxed at all. Imagine what an even greater benefit the Roth will be if you compound over 10, 20, 30 years!!! Company matching, if any, is as variable if not more than tax rates.

You can convert a much larger amount from your K or other IRA. So your middle class makes k a year, what would you call someone who makes 30k a year? Poverty level I suppose. I already paid well over a million in federal income taxes already. Your turn to take care of me and others. I think America will be a better place without people like you. Typical greedy republican bullshit. How about you, my comrade? Roth big gamble at best not just for the tax reasons sighted but bk earning potential so low with govt. If earnings are tax free but there are none compared to cost of living increase then where is the value in investing in a Roth.

Only time conversion might make sense is if you become unemployed for a year and return to high pay guaranteed in future. But longevity still makes it a gamble. Hey Irene- Stop with the you owe me attitude.

No one is against helping those who truly need it. Ask and show gratitude. Others give out of concern and brotherhood, not just bk you demand and demean. Poor judgement on your part to say America will be better off without earning taxpayers. That is like you killing the goose that lays your golden egg.

Think Girl and while your asking how about asking for a job…like the Chinese proverb, you know, learn to fish and feed yourself instead of asking to be handed one meal at a time. I just turned 25, make k a year, will max my k for with my next paycheck, opened up a brokerage account to pick up some stock in a few of my favorite companies this year, and also opened up a ROTH IRA at the same time.

I made a 5k contribution to the ROTH account in April and felt I was doing the right thing until I stumbled across this article and began to doubt my decision. Unless I am mistaken, a traditional tax-deferred IRA is not an option for me as I am making k a year and contributing to a k. Am I missing something, or is this correct? Thanks for stopping by. You are doing GREAT and if you keep it up for the next years, you are going to have tremendous optionality to do whatever the hell you want in life!

Trust me when I tell you that even the most exciting thing gets boring after a while, so you want to have the financial freedom to do something new. I know I did after 13 years working in finance. Contributing to a ROTH is better than not contributing. Finally, I strongly suggest you sign up for Personal Capital , an online wealth management company that is free for users.

You can track all your accounts in one place so you can have a better handle of your finances. It comes in handy the more accounts you have, and the more your wealth grows! You are obviously very gullible. This article is a waste of the bytes it is taking up on this site.

What do you think?

Unless of course it was meant to lend a bit of comedy. But realistically, the reasons he poses for not doing a roth are laughable at best. What does that even have to do with investing. Investing is not about equality.

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