sdrealtor – yes, you did. Ready to go to Vegas with me?
BW – Thanks for the additional insights. However, your observation: “Next, convert to Roth and pay the 30% or $3,000 tax from other funds that you might have spent on non-productive spending (entertainment, etc.)” begs the question. The tax is significant in our case. All of our “convertible” accounts are all funded entirely with before tax $$. The source of the IRA is rollovers of before tax 401ks from previous employers. The money we would use to pay the tax is not something we would otherwise piss away. For now, it is sitting in liquid accounts (e.g., money markets) collecting zip return, and it is money we would invest in something – for example, in equities once sdrealtor gives the green light, or – IF the waited for bottom ever happens, real estate! And, I would be paying these taxes OR investing with after-tax money left after paying a big chunk of tax payment. If my equity investments pay off by following sdrealtor’s lead, the cap gains tax – even under Obama – is a LOT lower than the income tax I have to pay to convert to Roth (under the “punish work, but reward stock market investing” system of our government).
Isn’t there a significant time-value of money loss if we pay tax now instead of paying it 20 years from now? I agree that “if” our tax rate goes up (not much “if” there), it might offset the time-value loss. But, this assumes they won’t end up taxing us on the “tax free” gains they are dangling as incentive for us to pay the tax now, which we both see as likely.
