Traditional, Roth, or both?

[Guest hairfarmer]

Greetings,

I have only basic knowledge about the IRA's.

I already have a Tradirtional IRA, but I want to open up an Roth IRA too.

Should I keep my Traditional and open up a Roth and just continue to put money into the Roth IRA?

In other words, my current Traditional IRA would continue accrue with the funds already in it. But then I would open a new Roth, and begin to contribute only to it.

Or should I convert the traditional into the Roth and start from there?

Make sense?

That way I wouldn't lose the money to taxes by converting the traditional to a Roth.

Am I overlooking anything?

Thoughts please?

Thanks!,

Hairfarmer

[John G]

There is a tradeoff between a standard IRA and a Roth. Some folks like the immediate deduction (if they qualify) of a standard IRA. The Roth gives that up but has tax free withdrawals, no fixed withdrawal schedule or start date, and you can withdraw contributions at any time. If your current tax rate is low, but you expect to have higher incomes or higher tax rates later, the Roth may work better. If your tax rate is currently low and likely to stay low, there is not a lot of difference between the choices. If you want more flexibility in dispursments - send more money to the Roth.

Converting a standard IRA to a Roth is a much more complicated scenario to evaluate. You would need to post a lot more info about your age, alternative retirement and non-retirement investments, your current tax rates, likely future tax rates, current state income tax, possible future state residence, etc..... Again, there is a tradeoff - pay the taxes now, or later. There is no "one size fits all" way to look at conversions.