Locator: 44386IRA.
Locator: 47976IRA.
Updates
November 22, 2024: wow, wow, wow. When considering a conversion (traditional IRA to Roth IRA) a financial advisor should ask you if you plan to significantly dip into your existing traditional IRA over the next ten years. See next note. This is a "philosophical / spousal" decision as much as a financial advisor's bean-counting decision.
November 22, 2024: many folks have a traditional IRA because the original "IRA" available was only the "traditional" IRA. It was only later that the Roth IRA became available.
A lot of folks are now considering converting their traditional IRAs to Roth IRAs, which for some/many/most/all is highly recommended. And some folks will feel like chumps if they don't do the conversion. But remember, in addition to the taxes upfront, this has become a cottage industry. A lot of banks and money managers will encourage folks to make conversion, looking at the fees they (money managers) will make providing you this service.
My cup is always half full. A conversion is only a small piece of one's entire financial universe. More important than a conversion is how one uses the cash from an RMD. I'm not happy with RMDs, but I can guarantee you, my wife is thrilled with RMDs. LOL.
November 22, 2024:
Asking AI: when a Roth conversions make sense size of portfolio when to convert --
Original Post
Locator: 47976IRA.
This is not an investment site. I
have had no formal training in "money matters" of any sort. The
following is simply how I see things and not advice or recommendations
for anyone else. It is advice for my extended family members. I assume
there will be content errors, and typographical errors. If something
seems wrong, it probably is wrong. If this is important to you, even
though it's not meant for you, go to the source. Don't take my advice.
So, awhile back, I wrote, with regard whether to fund a traditional IRA or a Roth IRA if given the opportunity / choice:
Traditional IRA or Roth IRA:
- the only "good" thing that a traditional IRA provides that a Roth IRA does not: a very, very minor tax break
- the tax break makes you feel good
- in
fact, the tax break the traditional IRA provides is nothing --
absolutely nothing -- compared to the tax advantages of the Roth IRA
- if
you really, really want that tax break that a traditional IRA provides,
invest only in a Roth IRA but calculate the taxes you would save by
investing in a traditional IRA: I will pay you that amount of savings in
cash when you file your taxes (this was written for one extended family
member and applied only to that one extended family member)
- note: in 2033, RMDs required starting at age 75.
- Roth IRAs: RMDs never required.
I've
said that for years. My original IRA was a traditional IRA -- Roth IRAs
did not exist. When Roth IRAs came along, the general advice, it
seemed, was to open a traditional IRA, not a Roth IRA. Somewhere along
the line, to "diversify," I opened a Roth IRA but kept the traditional
IRAs. Never converted.
But I continued to believe that the Roth
IRA was "head and shoulders" better than a traditional IRA. In my mind,
there was no comparison, no question which was better. The arguments
that sophisticated financial advisors made -- that the traditional IRA
was superior -- were inherently inconsistent -- their reasoning made no
sense -- so believe me, take the Roth IRA, forget about the traditional
IRA.
And guess what? I'm so correct, there's a small cottage
industry in the US now where financial advisors help you convert your
traditional IRA to Roth IRAs. That's how good Roth IRAs are. Everyone
now realizes how incredibly awful the traditional IRA is compared to the
Roth IRA.
How bad is it?
From CNBC today:
It's
not a slam dunk only because of the fees and taxes involved to make the conversion.
It still irks me when I see financial advice columnists advising folks to open a traditional IRA, rather than a Roth IRA.
