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Can ST confirm my understand: The benefit of a Roth IRA is that I pay the tax now but everything else in that account will be tax free? Traditional

Posted by James Bond (aka Igor) (aka Igor) May 27 '16, 09:52

IRA I will use pre-tax money but then everything I take out later will be taxed?

Sounds about right?

I need to transfer my pension (it is pre-tax) from my current employer. I am leaning towards Roth. Yes, I will have to pay a decent amount of tax this year (granted I have always been getting a refund, so possibly I will just get a smaller refund) but everything else in that roth account will later be tax free. I will likely be at a higher tax bracket later.

Responses:

I so much prefer our RRSPs and RESPs over all the shit you guys seem to have to navigate -- nm - Beaker May 27, 10:17 6
- we also have TFSA. I am not sure ours is that much easier. -- nm - Andie May 27, 10:21 5
  - TFSA isn't that complicated, really - Reagen May 27, 10:33 1
    - oh, i know, but i just think if we were here saying 'tax now / tax later. TFSA / RSP/ vs Pension, and CPP vs OAS, ' etc,. it would sound just as - Andie May 27, 11:18
  - they seem to all have rules upon rules -- nm - Beaker May 27, 10:24 2
    - Mostly to prevent them from being used as tax shelters -- nm - senor dentista May 27, 10:28 1
      - which is essentially what RRSPs are. Put money away now, pay tax when you atek it out. easy peasy -- nm - Beaker May 27, 10:43
Broadly speaking, yes. - znufrii May 27, 10:00 2
- The money transferring will count as income and can push me into a higher tax bracket? - James Bond (aka Igor) May 27, 10:02 1
  - Yup, it gets added to your agi when you convert it to a Roth -- (edited) - znufrii May 27, 10:07
My advisor said do both. Withdraw Roth IRA when you still have substantial income, then traditional IRA money later. -- nm - mara May 27, 10:00 1
- That makes sense -- nm - James Bond (aka Igor) May 27, 10:01
yes that is correct. you can also pull out all contributions tax free at any time. -- nm - iSpam May 27, 09:56 6
- Going off this. Can I use the Roth money to pay the tax? So you pretty much I can pull my initial amount of tranfer out of the Roth to pay the tax? - James Bond (aka Igor) May 27, 09:59 3
  - Doesn't work like that, I'm afraid -- (edited) - znufrii May 27, 10:05 2
    - Oh.. hmm -- nm - James Bond (aka Igor) May 27, 10:08 1
      - You don't have to do it all at once, afaik -- nm - senor dentista May 27, 10:12
- There are also income limits depending how much he anticipates making in the future -- (link) - senor dentista May 27, 09:59 1
  - yes, at some point I will go above that so I won't be able to contribute to a roth (currently that is nowhere near an issue) - James Bond (aka Igor) May 27, 10:00
Probably not worth it for this amount of money but you also have to factor in inflation. Money today is more valuable than it will be when you retire - senor dentista May 27, 09:55 3
- On the other hand you have to factor in investment growth over that time frame as well. - znufrii May 27, 10:16 2
  - which is assuming the tax laws state static for the next 30-40 years until he retires -- nm - decline May 27, 10:38 1
    - well, sure. - znufrii May 27, 11:06

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Can ST confirm my understand: The benefit of a Roth IRA is that I pay the tax now but everything else in that account will be tax free? Traditional

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