Reply to What is the deal with a Roth IRA?

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Reply to "What is the deal with a Roth IRA?"

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[quote=Anonymous][quote=Anonymous]Let me break this down.

Our HHI is well above the limit for roth IRA.  We max out two 401ks. At the beginning of each year - since I think 2008 - I deposit $5000 (now $5500 I think) in to traditional IRA accounts for each of me and my wife, and then immediately transfer (convert) that in to our respective Roth IRA accounts.  This is a no-brainer because we can't do pre-tax deposits to IRAs because we've already done the max to 401ks.  So the ability to convert after tax dollars to account thats will grow tax-free and pay out tax-free, no-brainer!

QED.

[/quote]

Just a word of caution...that works well for you but may not for everyone.  Make sure if you do the traditional to Roth conversion you have NO OTHER ira's (SEP, rollover, etc). Otherwise you have to take the combined balances in those accounts to come up with your taxable/non-taxable amounts from the conversion. For instance, my husband only has a roth and traditional so it works exactly as the above poster - converts the day after the deposit into the traditional, no taxes due. However, I have a SEP IRA so end up paying a portion since only part is considered tax free. I no longer do the Roth.[/quote]

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