Is anyone else converting their IRA's to Roths in 2010?
2010 is the magic year in which the previous restrictions about rothing money are gone, for one year, and there is no limit to the amount of money in one's IRA's that can be converted to Roths.
Is anyone else taking advantage of this? Are you also gulping at the tax bite involved in this? I know I'm doing the right thing long term, but at the moment it's painful.
We're thinking of doing that too. We told our 14 y/o who is old enough to get a job busing tables or bagging groceries this year, that whatever money she chooses to put away in a roth we will match, and we explained the value of time and the growth benefits b/c of protection from taxes. She was very intrigued - but whether that translates to delaying gratification by not spending some of her earnings for this, we'll see.
Quoting annie2244:
We're thinking of doing that too. We told our 14 y/o who is old enough to get a job busing tables or bagging groceries this year, that whatever money she chooses to put away in a roth we will match, and we explained the value of time and the growth benefits b/c of protection from taxes. She was very intrigued - but whether that translates to delaying gratification by not spending some of her earnings for this, we'll see.
She made $2400 before taxes last year and dh said he would put $2000 for her. She didn't save that much but she did do a good job saving and she only worked from August-Dec. My dd took lots of business classes in HS and knows how much you can have at retirement if you put in money now and DO NOT touch it.
That is so cool - both that she's working to earn that much, and that she's interested in saving for retirement and understands the incredible advantage of starting early, and that you guys are willing to help her get started.
AARP used to have a really good retirement calculator. You pop in your age and when you want to retire and how much you want to spend each year in retirement, and how much you've already saved for retirement, and how much you think you'll save every year going forward, and it calculates how much you'll have and how long it will last. I haven't shown my 14 y/o that yet b/c she'll be too discouraged. $5 million, or whatever amount it might show for her, would seem like such a preposterous number that she might quit b4 she's begun!
Quoting annie2244:
That is so cool - both that she's working to earn that much, and that she's interested in saving for retirement and understands the incredible advantage of starting early, and that you guys are willing to help her get started.
AARP used to have a really good retirement calculator. You pop in your age and when you want to retire and how much you want to spend each year in retirement, and how much you've already saved for retirement, and how much you think you'll save every year going forward, and it calculates how much you'll have and how long it will last. I haven't shown my 14 y/o that yet b/c she'll be too discouraged. $5 million, or whatever amount it might show for her, would seem like such a preposterous number that she might quit b4 she's begun!
Her Dad and I started saving when we first got married at 22 and 23 and we are 48 and 49 now. We are in very good shape now, even if SS is not around for us at some point.
We're the same age as you, started saving early, but I didn't meet my husband till I was 29. I have a feeling we may be in the minority on CM, or maybe the impression one gets is skewed b/c those complaining are the ones in more of a pickle.
Do you and your husband periodically doubt your frugality as you see people driving newer cars, living in larger houses, getting daily splurges like manicures and what not that you forego? We almost started a remodeling project that would have added a new room and remodeled the kitchen, but decided to roth all the ira/401k money that we have access to instead, which will cost as much as the remodel would have. I know it's the prudent decision, but it's not the most fun. Sometimes I wonder if I shouldn't be having more fun!
We have splurged later in life now and are lucky we can, but before we didn't. No regrets at all. I didn't have an engagement ring till we were married 15 years. We didn't take a honeymoon, or a "real" vacation until we were married 4 years. Even then dh's work paid for a lot because he was working in Europe for 4 months at the time. Our first real week long vacation we paid for was when we married 6 years besides visiting family.
We make too much to put in Roth's now so they are out of the question for us but not for dd.
Quoting annie2244:
We're the same age as you, started saving as early, but I didn't meet my husband till I was 29. I have a feeling we may be in the minority on CM, or maybe the impression one gets is skewed b/c those complaining are the ones in more of a pickle.
Do you and your husband periodically doubt your frugality as you see people driving newer cars, living in larger houses, getting daily splurges like manicures and what not that you forego? We almost started a remodeling project that would have added a new room and remodeled the kitchen, but decided to roth all the ira/401k money that we have access to instead, which will cost as much as the remodel would have. I know it's the prudent decision, but it's not the most fun. Sometimes I wonder if I shouldn't be having more fun!
As if we all have IRAs? In my dreams 
Yes - we're in the same boat - which is why 2010 is a magical year - there is no income limit and you can convert any amount of past ira's to roths. This may never be legislated to be possible again, so you should think about it. The only down side is that you have to pay taxes on any of those contributions and earnings that haven't yet been taxed, so it's a steep hit - but you can spread out payment of the taxes over this year and next. There are online calculators that can help you see whether you'd be better off converting your ira's to roths or not - you pop in the amount you want to convert, your current tax rate, what you think your tax rate will be in retirement, how soon you'll tap the converted money, how fast you'll tap it, and then it tells you how much extra you'll have, or lose, by converting. The market crash coinciding with this 2010 law change actually is a big bonus, as the value of the accounts is down, thus decreasing the taxes due.
Not only does your roth'd money build tax free, but you aren't forced to take it out once you hit age 67, as the laws force you to w 401k money, and it passes tax free to your heirs.
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- annie2244
on Mar. 20, 2010 at 5:09 PM