Tiberius Posted May 3, 2016 Share Posted May 3, 2016 (edited) I'm really divided over this. I have a traditional and love the tax right off. I then use the tax return to turn around and fund the IRA. But is that the smartest way to go? Would I be better off long term using the Roth and withdrawing the money tax free? I'm not planning on being in a higher tax bracket when I retire and I might actually not even be forced to spend the IRA savings, as I should have a good amount invested in other areas. Any suggestions would be appreciated. Thanks in advance Edited May 3, 2016 by Tiberius Link to comment Share on other sites More sharing options...
\GoBillsInDallas/ Posted May 3, 2016 Share Posted May 3, 2016 Link to comment Share on other sites More sharing options...
TakeYouToTasker Posted May 3, 2016 Share Posted May 3, 2016 You're on the record disparaging the importance of financial advisors, yet here you are, asking for important financial advice, on an anonymous Internet forum. Link to comment Share on other sites More sharing options...
Jauronimo Posted May 3, 2016 Share Posted May 3, 2016 I'm really divided over this. I have a traditional and love the tax right off. I then use the tax return to turn around and fund the IRA. But is that the smartest way to go? Would I be better off long term using the Roth and withdrawing the money tax free? I'm not planning on being in a higher tax bracket when I retire and I might actually not even be forced to spend the IRA savings, as I should have a good amount invested in other areas. Any suggestions would be appreciated. Thanks in advance That depends entirely on what your future goals and expenses look like. If you intend to dip into these savings to fund a vacation house in Libya, then you may consider a Roth. If you do not intend to touch these savings and think you'll survive your condition into old age, then traditional is likely best. Stay away from those dividend paying stocks whichever you decide. Link to comment Share on other sites More sharing options...
dpberr Posted May 3, 2016 Share Posted May 3, 2016 (edited) I handle real estate trust issues for my family and extended family. I've had this question come up a few times. What I can tell you is that the most important step in deciding on a course of action is having a brutally honest conversation with yourself. A conversation about when you'd like to retire and when you really can retire. Your debt situation. Your health. The two big issues are debt and health care expenses. A lot of people are underestimating what they will need for healthcare. A lot of people are carrying mortgages and credit card debt with payments that work on a "working" income but are downright crippling on a fixed income. One of my relatives continues to work and he's now 71. Healthy man. Since a traditional IRA caps at 70.5, he kept a lot in traditional IRAs up until he was 68 or so and then switched everything over. He didn't want to start to taking the mandatory disbursements and he wanted to keep putting money away. Edited May 3, 2016 by dpberr Link to comment Share on other sites More sharing options...
FireChan Posted May 3, 2016 Share Posted May 3, 2016 Covered Call! Link to comment Share on other sites More sharing options...
Tiberius Posted May 3, 2016 Author Share Posted May 3, 2016 That depends entirely on what your future goals and expenses look like. If you intend to dip into these savings to fund a vacation house in Libya, then you may consider a Roth. If you do not intend to touch these savings and think you'll survive your condition into old age, then traditional is likely best. Stay away from those dividend paying stocks whichever you decide. Really? Even with a Roth? But thanks. and I'm pretty sure I'll go with a traditional for the reasons you state. Link to comment Share on other sites More sharing options...
Tiberius Posted May 3, 2016 Author Share Posted May 3, 2016 I handle real estate trust issues for my family and extended family. I've had this question come up a few times. What I can tell you is that the most important step in deciding on a course of action is having a brutally honest conversation with yourself. A conversation about when you'd like to retire and when you really can retire. Your debt situation. Your health. The two big issues are debt and health care expenses. A lot of people are underestimating what they will need for healthcare. A lot of people are carrying mortgages and credit card debt with payments that work on a "working" income but are downright crippling on a fixed income. One of my relatives continues to work and he's now 71. Healthy man. Since a traditional IRA caps at 70.5, he kept a lot in traditional IRAs up until he was 68 or so and then switched everything over. He didn't want to start to taking the mandatory disbursements and he wanted to keep putting money away. Thanks. And yes I have really started taking that into consideration and looking into options. $12,000 a year perhaps? That will put off retirement at least a few years! Link to comment Share on other sites More sharing options...
Mark80 Posted May 3, 2016 Share Posted May 3, 2016 (edited) If you do the math properly it doesn't matter if you are paying taxes on it now or paying taxes on it later. It's a wash and really just personal preference. I prefer the Roth since I have already paid tax on it and know exactly what I will be getting later. Provides a bit more visibility into the future for my liking. But money wise, it is the exact same amount of tax either way. Believe me, I've meticulously compared them (assuming same tax rates now and later of course). Edited May 3, 2016 by Mark80 Link to comment Share on other sites More sharing options...
Tiberius Posted May 3, 2016 Author Share Posted May 3, 2016 If you do the math properly it doesn't matter if you are paying taxes on it now or paying taxes on it later. It's a wash and really just personal preference. I prefer the Roth since I have already paid tax on it and know exactly what I will be getting later. Provides a bit more visibility into the future for my liking. But money wise, it is the exact same amount of tax either way. Believe me, I've meticulously compared them (assuming same tax rates now and later of course). That's awesome. I was thinking the same thing but didn't do the math. Link to comment Share on other sites More sharing options...
jr1 Posted May 3, 2016 Share Posted May 3, 2016 https://www.fidelity.com/retirement-ira/ira-comparison Link to comment Share on other sites More sharing options...
Chef Jim Posted May 3, 2016 Share Posted May 3, 2016 You're on the record disparaging the importance of financial advisors, yet here you are, asking for important financial advice, on an anonymous Internet forum. Crazy isn't it? I was thinking the same thing but didn't do the math. Gee why doesn't this surprise me. Link to comment Share on other sites More sharing options...
/dev/null Posted May 3, 2016 Share Posted May 3, 2016 Political arguments aside, this has been my biggest worry about Roth since I got out of college. Someway, somehow, in the 40 years between the time I started working and when I would actually retire, they would figure out a way to double dip and tax the withdrawl. So I went the traditional IRA route. Tax deferred now. Withdraw at a lower bracket with employer contributions to help offset future taxes Assuming they don't find a way to confiscate redistribute manage my IRA by the time I retire. Link to comment Share on other sites More sharing options...
Chef Jim Posted May 3, 2016 Share Posted May 3, 2016 Political arguments aside, this has been my biggest worry about Roth since I got out of college. Someway, somehow, in the 40 years between the time I started working and when I would actually retire, they would figure out a way to double dip and tax the withdrawl. So I went the traditional IRA route. Tax deferred now. Withdraw at a lower bracket with employer contributions to help offset future taxes Assuming they don't find a way to confiscate redistribute manage my IRA by the time I retire. Already being done and funny you used the term my IRA. https://myra.gov/ Link to comment Share on other sites More sharing options...
/dev/null Posted May 3, 2016 Share Posted May 3, 2016 Already being done and funny you used the term my IRA. https://myra.gov/ Oh yeah, the myra scam, err retirement plan. When I first heard about that my first reaction was who in their right mind would enroll in such a terrible idea. Then my next reaction was eventually it won't be voluntary Link to comment Share on other sites More sharing options...
Chef Jim Posted May 3, 2016 Share Posted May 3, 2016 Oh yeah, the myra scam, err retirement plan. When I first heard about that my first reaction was who in their right mind would enroll in such a terrible idea. Then my next reaction was eventually it won't be voluntary Yup. Link to comment Share on other sites More sharing options...
KD in CA Posted May 4, 2016 Share Posted May 4, 2016 I have a traditional and love the tax right off. Link to comment Share on other sites More sharing options...
Chef Jim Posted May 4, 2016 Share Posted May 4, 2016 Yea I love a guy that gives up a $18k "right off" for a $5,500" one because he doesn't understand the pie charts. Link to comment Share on other sites More sharing options...
Tiberius Posted May 4, 2016 Author Share Posted May 4, 2016 Yea I love a guy that gives up a $18k "right off" for a $5,500" one because he doesn't understand the pie charts. What do you mean? Link to comment Share on other sites More sharing options...
Chef Jim Posted May 4, 2016 Share Posted May 4, 2016 What do you mean? You're not contributing to your 401k right? Link to comment Share on other sites More sharing options...
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