Poll

Should I leave both IRA's separate or convert the traditional over to a Roth?

Separate
7 (100%)
Convert Traditional to a Roth
0 (0%)

Total Members Voted: 7

Author Topic: Roth & Traditional or just Roth?  (Read 1956 times)

jly224

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Roth & Traditional or just Roth?
« on: September 12, 2013, 10:17:27 AM »
I finally decided to stop researching and act. This past Monday I moved my Schwab Roth IRA and Traditional IRA over to Vanguard and instructed them to put both funds in VTSAX. Iíve read the full investing series at http://jlcollinsnh.com/, among many, and even Jack Bogleís book.

The two different IRAís in my possession are the result of a Roth 401k plan I had with a previous employer. My contributions went into a Roth account, and their match went into a traditional account.

My question is, should I leave both of these IRAís separate, or eventually think about rolling the traditional IRA over to the Roth? I know there would be a tax hit, but Iím only 27 and figure that by the time I retire most of the value of both accounts will be interest, so it would be nice to not pay tax on the gains. Or if I leave both separated, should I just contribute to the Roth, or both? I know the limit is around $5500/yr, but does that apply to just one or the cumulative contributions to both?

Thank You, and hereís a link describing my current goal of paying off my student loans: http://jlyblog.wordpress.com/2013/09/10/goal-1/

JHC89

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Re: Roth & Traditional or just Roth?
« Reply #1 on: September 12, 2013, 11:02:10 AM »
I would say keep them separate for now and convert the Traditional to a Roth when you have a lower income so you take less of a tax hit.

Leaving them separate and figuring out where to contribute depends on your current income and planned retirement income. Do you have an idea about where those would fall?

Yep, $5,500 limit that applies to cumulative contributions: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits

matchewed

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Re: Roth & Traditional or just Roth?
« Reply #2 on: September 12, 2013, 12:04:03 PM »
Keep separate.

a) Your tax rate is probably higher now than when you will retire (a not unreasonable assumption). So why pay more taxes now on that amount?
b) You will probably accumulate more 401k's which need a place to go when they need rolling over.
c) Why would you want to convert it now?

Also please stop plugging your blog. Outline your plan and leave some link in your signature. I don't mean any offense but if I want to check out your blog I will, leave it as its own merits and not as a teaser for your posts.

jly224

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Re: Roth & Traditional or just Roth?
« Reply #3 on: September 12, 2013, 12:27:06 PM »
Thanks matchewed, consider your suggestions duly noted.