too old for Roth?

[Guest Douglas Nuetzman]

I am already 59, wy wife is 57 and we both work. Does it make any sense to initiate Roth IRAs at this age, with only a few years left til retirement? We each have traditional IRAs (to which we have not contributed in recent years since we can no longer contribute pre-tax money).

With current income over $1000000, conversion of the existing ones to Roth has not been considered.

Thanks

[John G]

If your income figure of 1M is correct (income not assets?) then you don't qualify for a Roth. However, if you own a business you have lots of retirement/shelter options and should talk to your tax advisor.

Age is not your problem.

One of the benefit of funding a Roth is that you have no mandatory dispursements which gives you flexibility and potentially some attractive inheritance options.

[Guest Douglas Nuetzman]

Interesting typo there.

Current income is around $100,000. (If only....)

[John G]

100k allows you to qualify for a Roth contributory account if you have "earned income" (payroll). You would be disqualified for a Roth Conversion unless your married filing joint income is below 100k.

You seem to highly value the initial tax deductability of traditional IRAs. That is a nice front end benefit, but often it is overwhelmed by the long term value of having your investments in a tax shelter. One tax issue to consider is that disbursements by non-Roth IRAs are taxed as ordinary income while non-sheltered long term investments are taxed at a lower capital gain rate. Disbursements from a Roth are not taxed.

Lots of choices involved and some guessing about your future income and the possible future tax structure.

[Guest Ed Lichtig]

A roth IRA conversion is an excellent idea if you can qualify assuming you can pay theRoth conversion tax with other $s and assuming you can let the Roth IRA $s accrue. Tax free growth is worthless if you need to acces the money in the near future.

An even better solution might be the Pension Asset Transfer plan which allows you to simulate the benefits of a Roth IRA without the current tax costs normally associated with the Roth conversion. You can learn more about the Pension Asset Transfer plan by visiting http://www.pension-asset-transfer.com

[JAMES PATRICK]

Roth accounts require a 5 year period before all earnings can be withwdarn tax free. So I believe you and your wife should set one up for each of you right now.

If you retire before 65, and before taking pension and social security,you could convert your IRA's to a Roth and depending on other income have it taxed at possibly 15% rather than at higher rates when pension and social security get thrown into the mix.

By each contributing $2000 each before you retire you will be funding an account that will be basically tax free for your lifetimes. If you are saving anything right now you are paying taxes on it (savings accounts,dividends,etc) which you wouldn't if it was in a Roth.

[Guest Douglas Nuetzman]

Thanks James (and others).

Now two basic but timely questions:

1. Is the yearly contribution limit $2000. I assume it is.

2. What is the deadline for opening a new Roth - Dec 31 or sometime into 2001, like April 15? I realize I should have started this sooner.

[JAMES PATRICK]

Provided that you and your wife's AGI is less than $150,000 you can each contribute $2,000 to your own account.

You have until the due date of your 2000 return, no extensions, which is April 16?,2001.

The $2,000 limit is for ALL IRA's not just Roth.

[John G]

If you wait until January, you can fund both 2000 and 2001 contributions on the same day. Just make sure you use two checks and note the contribution year and bring it to the attention of the custodian. Then check your statements to make sure they posted it correctly.

[Guest Art E]

Doug

Why do you feel going to the Roth is advantageous for you? Do you have anything quantative for your specific situation that suggests it may be a good move? Or are you simply hoping the Roth will be good? I believe John G touched on the issue that these things need to be "examined".

Art E

[JAMES PATRICK]

Doug,

As I said earlier, if you are currently saving money from your earnings, dividends, etc. contributing to a Roth is an easy decision. If you leave the account alone for 5 years you will NEVER pay taxes on it. If you need the money in an emergency you only pay taxes on the earnings which would put you in the same situation you are in now. What quantative?

[Guest Art E]

James

My error. You are correct. Contributing to the Roth in Doug's case is indeed a no-brainer. I thought Doug was talking about converting his IRAs to a Roth, but after re-reading his original post, I now see that conversion wasn't even a consideration, no doubt due to the 100K+ income. Again, my error in not reading his post propery.

Art E