An admittedly goofball reason we are keeping our pre-tax retirement accounts in equities for the time being is that we’re considering converting to Roth next year. Our current retirement accounts are all pre-tax because of the income limits on Roth contributions until now. But, Harry, Nancy and Barry need my money NOW, not later when they are gone, and the “opportunity” to pay a butt load of tax now to convert the whole wad to “after tax” status in 2010, with (allegedly) tax free accumulation thereafter (yes, assumes we can “accumulate” rather than depreciate) is intriguing. If equities dip, drop, plummet, etc., by the time we hit Jan 1, 2010 (I believe the date that matters for tax liability purposes), then we pay less tax in 2010 (and 2001) for doing the conversion.
Am I being stupid because it’s better to pay a higher tax and have higher principal to grow thereafter tax free if I convert to cash? Or am I being stupid for even considering converting to Roth to begin with? Or both? (they are not mutually exclusive stupidities).
Are any of you Piggs or Pigglets considering converting pre-tax to after-tax next year? There is part of me suspicious that a broke and destitute government 20 years from now will change the rules and tax us on the gains anyway, or count the Roth account distributions against us in determining how much tax on pay on other income sources. Government changes the rules all the time and has no memory.
If I convert to cash to “fix” the amount, I pay tax on the current levels even though I do not intend to make any withdrawals for least another 20 years (I am 48 this year).
Have any of you Piggs (or Pigglets) been pondering this same dilema? Am I being stupid because better to pay higher tax and still have the principal to grow thereafter tax free if I convert to cash? Or am I even dumber for even considering converting to Roth to begin with?
Is anyone else considering the conversaion of pre-tax to Roth and paying the taxes now? there is part of me suspicious that a broke and destitute government 20 years from now will change the rules and tax us on the gains anyway, or count the Roth account distributions against us in determining how much tax on pay on other income sources.
