Thanks for your response(s). I agree regarding the non-use of the funds to pay the taxes, but regarding splitting the tax bill with 2011, that will likely be a loser for us since the GWB tax rates expire and the Obama et al tax rates (and surcharges) will kick in. Probably makes more sense just to pay the bill in 2010.
Regarding equities v. cash, maybe I don’t understand what you mean, but I thought this was account-based. For example, we have an IRA account funded through the years by a couple of rollover 401ks from past employers. The money within the IRA account, for better and worse, is invested in several different equity funds. If we sell the funds and buy T-bills, or the like, the monies are still under the “umbrella” of the same IRA account.
Setting aside my complete lack in trust of government (out of its demonstrated ineptness more than anything else) I’m still not convinced paying the taxes now makes sense. Help me with the math (or the meth, if need be for understanding the numbers).
In addition to the IRA, I have a current 401K (all before tax contributions), plus my wife is a teacher, and we pump the full amount allowed each year into each of her 403b and 457k plans. As far as I know, these are the same as 401ks in the eyes of the IRS.
We are in the max tax bracket (net incremental Fed and Cal is around 42% excluding SEF taxes which are not avoided by these plans). If we “convert” one or more of our existing IRA, 401k, 403b, 457 accounts to after-tax Roth status by paying the taxes in a lumpo sum, can we continue to contribute the same annual amounts to the accounts “after tax” from now on, despite our income being over the traditional Roth limits?
Or, can we just “convert” what we have in the pot as of Jan 1, 2010, and then go back to before-tax contributions (making for an accounting Cluster Shucks situation by the time we retire)?
I’ll take all free advice from anyone who has some insight on this stuff. Thanks.
