Originally Posted by mkond
I am primarily looking for advice. I am currently 27 years old and have around 28k in traditional ira that i recently converted from one of my 401k funds. But now I am strongly considering converting all of it to roth and paying all the taxes in one year. I am in a 25% bracket and i think the tax comes out to around 7k, I am thinking that in the long run i will make more money with growth by paying the 7k now on this amount as opposed to when it grows. Any advice is appreciated.
I guess your decision’d be very wise as you’ll make more income in the long run due to great tax savings as you can see; Converting to a R-ira means undoing the deferral by paying tax on the accumulated earnings and on any savings contributions for which the person took a deduction. This converts the funds into post-tax moneybeginning in the year 2010, all restrictions on converting to a R- IRA have been removed. Prior to 2010, individuals were not allowed to convert to a R-IRA if their AGI exceeded 100K;for r-ira, no deduction for the savings contribution, earnings are tax-free as long as the funds have been invested at least 5 years.
So, the benefits of converting to a Roth vary significantly depending on what type of investment vehicle (or "wrapper") was chosen in previous years. However, the tricky part is figuring out what your tax cost of converting to a R-ira will be; whether converting to a R-ira will save or cost you money over the long-run; ;how much to convert. : you may convert all of your traditional IRAs to the r-ira. You MAY convert none, some, or all of your traditional IRA savings whether deductible or nondeductible to your R-ira.