marckassay@[EMAIL PROTECTED]
wrote:
> Thanks everyone for the replies; my questions got answered.
>
> @[EMAIL PROTECTED]
> To clarify let me state this first, for 2007 tax year I was in the 25%
> tax bracket and I am assuming I will be employed soon.
>
> You mentioned that if I was unemployed for some time during 2008 and
> fell in the lower 15% tax bracket I would, "... convert and pay $600 in
> tax. You are ahead $400." Can you elaborate that example? I am not
> sure what I would be converting.
>
> Also a "deductible IRA" is that a traditional IRA?
>
> Thanks.
(sorry for the delay - I was away)
A traditional IRA may be deductible, based on participation in other
company plans, and income.
A roth has its own income restrictions.
jIM got it right as far as my approach goes:
If in 15% bracket, go Roth. If higher, go deductible IRA.
If usually in higher, (than 15%) but in 'this' year back in 15% or
lower, you may 'convert' traditional IRA money to a Roth, and pay the tax.
In the example you quote above, I propose this (if I understood your
situation); In 2007 make a traditional IRA deposit. You get $1000 tax
break on the $4000 deposit. In 2008, convert it (at 15% if that's your
bracket this year) and pay $600 in tax. This approach works great for
those who have any disruption in income, lob loss, spouse out for
newborn, etc. I'm sure I could go on about it, with more words and
examples, but I think this is pretty clear. (follow up questions are
still free)
JOE
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators
strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM
THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on
the
Newsgroup.
|
