Suze Orman gives suggestion that people should rollover your previous employment 401k into traditional IRA. Then she say that in 2010 to move this traditional IRA money to a Roth IRA.
Several Questions:
1. What is a "traditional" IRA?
2. What is the logic/benefit to move it to a Roth IRA within 2010?
3. Won't it get tax once it is moved to Roth IRA? If not, why not?
Answers: 1. A traditional IRA is a tax-deferred account. You can contribute up to $5,000 per year and dwindle your taxable income. In other words, you pay no taxes on the contribution, but it grows tax-free until you annul it (at which it is taxed as standard income)
2. Some think that our import tax rates must go up since they are currently at historic lows. So pay envelope a low tax presently and then no taxes following (Roth). So, Bush's tax cuts stir away in 2010 so our taxes will shift up in 2011 when Congress doesn't renew them. Plus, contained by 2010, even high income citizens not normally eligible for a Roth will be capable of convert.
3. It will be taxed when you move it over. But you will never own to pay taxes on that money again!
Note: you should not do this if you are close to retirement and enjoy a large percentage of employer stock contained by your 401k.
because she's hitching everyones financial future on the reality that she thinks we will adjectives be paying HIGHER taxes when we retire than we are now. So she's proverb that in 2010 when you can convert voluminous sums into a ROTH rather than the controlled amounts now you can necessarily make your entire rationalization non-taxable.
However, unless she personally guarantees her statements (which she won't) near an annuity that will make up the difference should your taxes if truth be told be lower then I'd evade my bets and put some in pre-tax, some contained by after tax, and some within tax free municipal bonds. Diversity is not restricted to just where on earth you invest but in the excise status of the money.
And, you'll have to remember that it's not a duty free move. If you've got 150k contained by your retirement in 2010 afterwards you'll owe 28% in taxes on that amount or 42k. Might want to rescue some cash.because yes..it's cost free transfer but not a tax-free verbs.
If you roll it over into an IRA and then contribute to it, you lose the opportunity to roll it into another employer 401k or other retirement plan.
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Several Questions:
1. What is a "traditional" IRA?
2. What is the logic/benefit to move it to a Roth IRA within 2010?
3. Won't it get tax once it is moved to Roth IRA? If not, why not?
Answers: 1. A traditional IRA is a tax-deferred account. You can contribute up to $5,000 per year and dwindle your taxable income. In other words, you pay no taxes on the contribution, but it grows tax-free until you annul it (at which it is taxed as standard income)
2. Some think that our import tax rates must go up since they are currently at historic lows. So pay envelope a low tax presently and then no taxes following (Roth). So, Bush's tax cuts stir away in 2010 so our taxes will shift up in 2011 when Congress doesn't renew them. Plus, contained by 2010, even high income citizens not normally eligible for a Roth will be capable of convert.
3. It will be taxed when you move it over. But you will never own to pay taxes on that money again!
Note: you should not do this if you are close to retirement and enjoy a large percentage of employer stock contained by your 401k.
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because she's hitching everyones financial future on the reality that she thinks we will adjectives be paying HIGHER taxes when we retire than we are now. So she's proverb that in 2010 when you can convert voluminous sums into a ROTH rather than the controlled amounts now you can necessarily make your entire rationalization non-taxable.
However, unless she personally guarantees her statements (which she won't) near an annuity that will make up the difference should your taxes if truth be told be lower then I'd evade my bets and put some in pre-tax, some contained by after tax, and some within tax free municipal bonds. Diversity is not restricted to just where on earth you invest but in the excise status of the money.
And, you'll have to remember that it's not a duty free move. If you've got 150k contained by your retirement in 2010 afterwards you'll owe 28% in taxes on that amount or 42k. Might want to rescue some cash.because yes..it's cost free transfer but not a tax-free verbs.
If you roll it over into an IRA and then contribute to it, you lose the opportunity to roll it into another employer 401k or other retirement plan.
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