Any reason to open a Roth in 1998 if I am not going to convert for 5 y

[Guest joeblues]

I realize the sooner I start putting the max. in each year the more tax free earnings I will have over time. However I am already investing in several areas including 401k and a brokerage acct. Do I need to rush and open a Roth this year or can it wait. If I do open a Roth before Dec 31st 1998 can I split up the tax cost of conversion over 4years when I rollover my 401k in 2003?

[This message has been edited by joeblues (edited 12-24-98).]

[Guest Paul McDonald]

Have you considered deferring the maximum amount into your 401(k), your age and life expectancy, expectations of future tax rates, retirement income needs, etc. Much needs to be considered to see if a Roth IRA fits in your retirement planning future.

The 4 year spread is only available for IRA conversions before 12/31/98. Can't say what the picture will be like in 2003. Under current law you could do a directed rollover of your 401(k) distribution to an IRA and then have to decide whether the conversion from traditional IRA to ROTH (paying taxes in 2003) makes economic sense. Life expectancy, future tax rates, investment return, inflation, etc. could result in it not being in your economic interest to convert (a lot of present value/future value analysis). Then again, maybe it would. Love to have a crystal ball to know what the tax picture will look like in 2003 and beyond. We hardly know from one year to the next as to what will happen. Roth IRAs could become extinct by then.