Author Topic: Roth IRA vs IRA  (Read 1782 times)

0 Members and 1 Guest are viewing this topic.

Offline lovingit

  • O.C. Resident
  • ***
  • Thanks
  • -Given: 4
  • -Received: 17
  • Posts: 552
Roth IRA vs IRA
« on: December 08, 2020, 07:28:13 PM »
Most people say that Roth IRA is better.  In general, if you think you'll be in a higher tax bracket when you retire, a Roth IRA may be the better choice. You'll pay taxes now, at a lower rate, and withdraw funds tax-free in retirement when you're in a higher tax bracket.

However, when you are retired, you technically won’t be working.  Thus, you should be at a lower tax bracket than when you are working.  So isn’t a IRA better?  You get taxed at a lower bracket when you start withdrawing in your 60-70s. And it gets to grow faster because you don’t pay taxes when you contribute to it like you do with a Roth IRA.  Thoughts?

Offline eyephone

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 489
  • -Received: 768
  • Posts: 13918
Re: Roth IRA vs IRA
« Reply #1 on: December 08, 2020, 07:42:12 PM »
All depends. Do you own your own business?

Offline eyephone

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 489
  • -Received: 768
  • Posts: 13918
Re: Roth IRA vs IRA
« Reply #2 on: December 08, 2020, 08:29:55 PM »
SEP IRA can contribute more.

Offline lovingit

  • O.C. Resident
  • ***
  • Thanks
  • -Given: 4
  • -Received: 17
  • Posts: 552
Re: Roth IRA vs IRA
« Reply #3 on: December 08, 2020, 10:55:23 PM »
All depends. Do you own your own business?

No

Offline daedalus

  • O.C. Resident
  • ***
  • Thanks
  • -Given: 239
  • -Received: 264
  • Posts: 942
Re: Roth IRA vs IRA
« Reply #4 on: December 09, 2020, 01:12:31 AM »
And it gets to grow faster because you don’t pay taxes when you contribute to it like you do with a Roth IRA. 

Not sure what you mean by this.  Given the same tax rate now and later, the same before-tax sum, and the same investments, the money-in-your-pocket results will be the same between the traditional and the Roth.  But the Roth allows for a larger effective contribution, since it's after-tax money.

For the 5%ers the Roth is the only 1 that makes sense, via the back door. 

Offline aquabliss

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 213
  • -Received: 799
  • Posts: 4103
Re: Roth IRA vs IRA
« Reply #5 on: December 09, 2020, 07:43:33 AM »
Do you have any after tax, non retirement investments?  If yes I’d say use up your Roth space for this (fully) first before investing in a normal brokerage account.

Reason is because all the contributions in the Roth can be taken out tax and penalty free at any age.  So if you invest $60k in a Roth over a 10 year period and it goes up to $150k, you can take out up to $60k out of your Roth tax and penalty free at any age.

Where else can you get tax free growth like that with non-retirement funds?

Offline woodburyowner

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 69
  • -Received: 154
  • Posts: 1040
Re: Roth IRA vs IRA
« Reply #6 on: December 09, 2020, 08:56:59 AM »
One of the biggest benefits of a Roth IRA is that it is NOT subject to RMDs (required minimum distributions) whereas IRAs are.  This allows a lot more flexibility when you hit 72 years old.

The following member(s) thanked this post:


Offline nosuchreality

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 145
  • -Received: 538
  • Posts: 2488
Re: Roth IRA vs IRA
« Reply #7 on: December 09, 2020, 09:11:56 AM »
Can I roll a IRA to a new IRA and split it to an IRA & Roth to convert a larger IRA without blowing out my tax rate?

I.e. Serially roll an IRA every year realizing a low effective tax rate to convert an IRA over the next 5 years?

Offline aquabliss

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 213
  • -Received: 799
  • Posts: 4103
Re: Roth IRA vs IRA
« Reply #8 on: December 09, 2020, 09:34:21 AM »
Can I roll a IRA to a new IRA and split it to an IRA & Roth to convert a larger IRA without blowing out my tax rate?

I.e. Serially roll an IRA every year realizing a low effective tax rate to convert an IRA over the next 5 years?

Not sure I understand your question exactly or why you would need to do the first part "roll an IRA to a new IRA".  Just take your existing IRA and roll (any amount or percentage) into your Roth IRA and that will be taxable income for that calendar year.

If you have a $100k traditional IRA you can choose to roll $5k into a Roth, or $100k into a Roth.  Both are taxable events at ordinary income rates. 

I have a traditional IRA sitting around that I've been meaning to roll into my Roth for years, but never wanted to tax burden.  At this point I think I'll just let it sit there until I retire and try to have some years with no or very low taxable income (in retirement) and roll all the rest up to the point of not being taxable from my traditional to Roth at that time. 

Offline nosuchreality

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 145
  • -Received: 538
  • Posts: 2488
Re: Roth IRA vs IRA
« Reply #9 on: December 09, 2020, 10:01:42 AM »
I was thinking the same, previously when I've checked, the phone flunkies are always confused when I want to move part of my IRA and seem to get hung on doing a withdrawal. 

Same issue with not wanting the tax hit previously, now I'm wondering if moving a chunk of it now is better than taxes 20-25 years from now when min dist kick in.

Then again, twenty years of growth on the tax is pretty healthy.

Offline aquabliss

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 213
  • -Received: 799
  • Posts: 4103
Re: Roth IRA vs IRA
« Reply #10 on: December 09, 2020, 10:23:17 AM »
I was thinking the same, previously when I've checked, the phone flunkies are always confused when I want to move part of my IRA and seem to get hung on doing a withdrawal. 

Same issue with not wanting the tax hit previously, now I'm wondering if moving a chunk of it now is better than taxes 20-25 years from now when min dist kick in.

Then again, twenty years of growth on the tax is pretty healthy.

I would look for a new brokerage.  This is a pretty common thing.  If they can't figure out what you want to do when you ask them to "convert $X of my traditional IRA into my Roth IRA", then they're in the wrong field.

Maybe they're getting confused because you currently don't have a Roth IRA account with the same brokerage?  Even then, they should be able to figure out what you're asking.

Offline AW

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 46
  • -Received: 172
  • Posts: 1759
Re: Roth IRA vs IRA
« Reply #11 on: December 10, 2020, 07:52:22 AM »
anyone here with good recommendations on brokerage for small business, sep ira, backdoor ira conversions....  tia

Offline OCtoSV

  • Yearning for 949 / 714
  • **
  • Thanks
  • -Given: 51
  • -Received: 33
  • Posts: 217
Re: Roth IRA vs IRA
« Reply #12 on: December 11, 2020, 08:41:46 AM »
After listening to Mo Ansari on the radio and KWHY for a few decades I recently evaluated and then signed up with him at Compak Asset Mgt. Comes with CFP services and backdooring my large rollover IRA into a Roth over the next decade or so until retirement is a key activity they will be managing.

Offline kpatnps

  • Tourist
  • *
  • Thanks
  • -Given: 12
  • -Received: 13
  • Posts: 73
Re: Roth IRA vs IRA
« Reply #13 on: December 11, 2020, 05:20:55 PM »
After listening to Mo Ansari on the radio and KWHY for a few decades I recently evaluated and then signed up with him at Compak Asset Mgt. Comes with CFP services and backdooring my large rollover IRA into a Roth over the next decade or so until retirement is a key activity they will be managing.

You might be hit with a fairly large amount of taxes if you do this.  I suppose it would depend on your yearly taxable income.  Check out the pro rata rule.

Offline OCtoSV

  • Yearning for 949 / 714
  • **
  • Thanks
  • -Given: 51
  • -Received: 33
  • Posts: 217
Re: Roth IRA vs IRA
« Reply #14 on: December 16, 2020, 09:52:21 AM »
tax rates have never been lower - really best to do it now depending on how much extra $$ one can devote to paying taxes.

 

Talk Irvine Links

[Recent Posts]
[FAQ / Rules]

Site Supporters


Recent Posts

Re: coronavirus by irvinehomeowner
[Yesterday at 09:23:26 PM]


Re: Work situation? by daedalus
[Yesterday at 05:51:35 PM]


Re: Fresco @ Eastwood Village by USCTrojanCPA
[Yesterday at 05:49:20 PM]


Re: Fresco @ Eastwood Village by USCTrojanCPA
[Yesterday at 05:47:10 PM]


Re: Fresco @ Eastwood Village by Irvinehomeseeker
[Yesterday at 04:26:03 PM]

SimplePortal 2.3.7 © 2008-2021, SimplePortal