(Closed) Switching from Roth to Traditional

posted 5 years ago in Money
Post # 3
Member
168 posts
Blushing bee
  • Wedding: April 2013

You should speak to a tax advisor.  Depending on your income it may not make sense to go into a traditional.  Also, the way that tax law is right now when you retire you will receive your distributions tax free from the roth on the other hand the traditional would be considered taxable and could increase your tax bracket.. Not usually something that you want to do when you are older..  Hope that helps..

 

Post # 4
Member
7311 posts
Busy Beekeeper
  • Wedding: October 2011 - Bed & Breakfast

Our financial planner has us doing all traditional right now for the tax benefits, with a plan to diversify into Roths after we hit 40 (aka After we are finished saving/paying for Teen LK’s college, so basically we’ll switch from college saving to more retirement saving). The plan is to use a mix of roth and traditional funds during retirement in a manner that best manages whatever the tax brackets will be at that time. Since we can’t predict the future, diversity is the best way to give us future flexibility.

Post # 5
Member
30 posts
Newbee
  • Wedding: September 2014

The general rule of thumb is to look at what tax brackets you are in now and what tax brackets you *expect to be* when you are withdrawing from your retirement fund.  If you’re in a higher tax bracket now, then it makes sense to go with traditional so that you can “push” the tax-paying to when you’re in a lower tax bracket when you retire.  If you are in a lower tax bracket and expect to continue working and growing your salary (i.e. not being a SAHM), I think it makes more sense to stick to Roth. 

Also, IRAs (well, the tax benefits anyway) are only available to couples where adjusted gross income (AGI) is less than $187,000, which is something else to keep in mind if you are a double-income household.  In another decade if both you and your spouse are working you may hit that limit.

So, my advice to you (in additional to speaking with a fee-only financial adviser) would be to look at your current tax bracket, keep contributing your max to your IRA, and also open a 401k (you can have a Roth 401k btw) because I always encourage saving 🙂

Post # 6
Member
6124 posts
Bee Keeper
  • Wedding: August 2012

“The general rule of thumb is to look at what tax brackets you are in now and what tax brackets you *expect to be* when you are withdrawing from your retirement fund.  If you’re in a higher tax bracket now, then it makes sense to go with traditional so that you can “push” the tax-paying to when you’re in a lower tax bracket when you retire.  If you are in a lower tax bracket and expect to continue working and growing your salary (i.e. not being a SAHM), I think it makes more sense to stick to Roth.”

 
This is exactly how I heard it put!
 
We do Roths, but we do other tax-deferred accounts (HSA, 457b, 403b).

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