Really timely article for me ROTH related.

I have an employer sponsored SIMPLE IRA ( i'm the employer ). It allows up to $10k per year and the company contributes 3% of salary. It functions just like an IRA as far as taxes.

I've considered moving these funds into a ROTH - I can move all of them if I pay the taxes as income - no taxes on gains.

I have not done so b/c I don't want to pay an enormous tax bill now. I discussed this with Vanguard at length the other night, and realized how much work I'd need to do to stagger the transistion over several years to ease the tax hit ( I'd have to cut a check from seperate funds in order to avoid an early withdrawal penalty ).

My argument - which he stated was extremely valid - was that I was unsure how much I'd actually save - 24 years from now - from the ROTH. Sure - it'd be totally tax free 24 years from now, but I'd lose the growth opportunity for what I'd pay in taxes today, because the seperate funds I'd use to pay the taxes would normally be invested.

This article says I should keep investing and leave that money in my SIMPLE, bypassing the ROTH.

http://finance.yahoo.com/focus-reti...h-IRAs-Good-for-You-or-Not?mod=retirement-IRA

 

I think the biggest ROTH things for me are:

Tax free withdrawals after 70 1/2. I had no idea I'd have to cash out and pay taxes on my IRA at 70 1/2. That is completely fucked up.

Tax free withdrawals beginning at 59 1/2. I'd like to retire at 55, so that'd be a big help.

Uncertain tax rate in retirement.

Lots of problems with me trying to 'convert', mainly income restrictions, tax bracket increases due to the conversions, tying up investable cash in tax bills generated by the conversions to name a few.

 

I have both a ROTH and Traditional IRA. Prefer they both be ROTH but had to roll over a 401k from a previous employer. As far as retirement tax rate, I'm gonna bet mine is going to be lower but I have no way to know for sure.

My present employer is introducing a ROTH 401(k) plan for next year. Think I'm going to take advantage of that.

 

Meatpile,

If you can set up a Roth now, put new money in that investment vehicle until you don't qualify for it, then put the remainder in the traditional IRA.
As you mentioned, the Roth provides a hedge against future tax rates, which are my real worry. If in the future you have a year where your income is down for some reason, you can use that year to roll over the funds if your tax rates are lower. I did this last year when I took a 6 month leave of absence to deal with a sick family member. I don't think it makes sense to transfer the funds when you are in the higher brackets unless you believe you will remain in the top brackets even in retirement.
If you actually retire at 55, you will have a few years of lower income to move the money (if it still makes economic sense then) before you have to start taking withdrawals.
I believe that tax rates are going up in the short and long term on everything. I am looking at selling some investments next year just to take advantage of the capital gains rate, I will then buy something else at a stepped up basis.

Good Luck,
N1R0L