When Roth IRA Conversions Aren't Tax Friendly

Tax-free Roth IRA distributions can be a valued source of retirement income; withdrawals are completely untaxed after age 59-1/2, assuming the account is at least five years old. However, building up a Roth IRA recently hit a snag.

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Comments (3)
As a separate but related issue, I have been a lone voice out there saying ROTH conversions are a "trap".
Pay taxes now so you won't have to later?
Says who?
Congress?
Would that be the same body that said Social Security benefits would never be taxed?
The same body that says it is OK for us to be TAXED on our TAXES (the AMT, in part)?
Either they will come to their senses (and take ECON 101, maybe)and raise REVENUE by LOWERING taxes, in which case pre-paying at today's high rates will have been a mistake, or their insatiable need for more and more of the fruits of our labor (which we allow them) will continue, in which case, ALL sources of revenue are fair game.
Not much is easier for them than taxing the savings of "the rich". As the President said, unchallenged, "I do think at a certain point you've made enough money".
Posted by Robert B | Monday, August 04 2014 at 12:56PM ET
As a separate but related issue, I have been a lone voice out there saying ROTH conversions are a "trap".
Pay taxes now so you won't have to later?
Says who?
Congress?
Would that be the same body that said Social Security benefits would never be taxed?
The same body that says it is OK for us to be TAXED on our TAXES (the AMT, in part)?
Either they will come to their senses (and take ECON 101, maybe)and raise REVENUE by LOWERING taxes, in which case pre-paying at today's high rates will have been a mistake, or their insatiable need for more and more of the fruits of our labor (which we allow them) will continue, in which case, ALL sources of revenue are fair game.
Not much is easier for them than taxing the savings of "the rich". As the President said, unchallenged, "I do think at a certain point you've made enough money".
Posted by Robert B | Monday, August 04 2014 at 12:56PM ET
I am not sure I ever heard anyone say SS would never be taxed. I do not enjoy paying taxes anymore than anyone else but I would rather have the income and pay taxes than not have the income and pay NO TAXES. Actually I have a new home, new car and lived on $22.028.21 last year and this included purchasing a new solid cherry dining room table with 6 upholstered chairs. This year I will spend $18,149.86. I gift more than I live on and my taxes are about what I live on also. So what? A person needs a warm house, food and good health. Everything else is not a necessity. Why are we always so greedy? We make our own destiny by the choices we make.
Posted by Rose s | Thursday, August 21 2014 at 7:24AM ET
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