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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Labrador who wrote (5883)	9/21/2010 2:02:04 PM
From: Triffin	Read Replies (1) \| Respond to of 34328

I don't know the ramifications of a VAT on the conversion of a traditional IRA to a ROTH IRA .. I do know that any and all distributions from a ROTH IRA are tax free provided the account is "aged" ie in place for at least 5 years and that the owner has reached the age of 59 1/2 .. You must fund a ROTH IRA with after tax dollars ( no deductions on current taxes ) and there are income limits for making contributions in the first place; but these limitations are IMHO more than offset by the ability to compound investments tax free over time and to receive disbursements on a tax free basis when the time comes .. It's a truly powerful compounding machine for younger investors ( need W2 income ) who wish to maximize long term growth of capital and eventual tax free income .. Triff ..

To: Labrador who wrote (5883)	9/21/2010 3:08:46 PM
From: geoffrey Wren	2 Recommendations Read Replies (1) \| Respond to of 34328

There are so many variables to a conversion. The VAT is certainly one. One can imagine a future where income tax rates are lower, and a VAT tax is in place. So then you wonder: Why did I convert? There are some ways that ROTH are better: No forced withdrawals, and better treatment in estate tax calculation. Also if you have a portion of your IRAs in ROTH, you can do some timing on recognition of income to try to avoid top tax rates. If there are people out there unemployed and not paying taxes, they out to convert at least a little if they can do it for free. One way a conversion is certainly questionable is if you are in a high tax state like California and plan to retire in a low tax state or no tax state like Nevada. You have to compare the combined taxes now in conversion to the federal only taxation in retirement. I doubt very much that a VAT will be implemented anytime soon. It is good tax policy, but it will not be implemented. To get it implemented, promises will be made to reduce other taxes, but there will be extreme skepticism that the other taxes will stay reduced, and therefore the VAT will not make it. That is one person's opinion only, of course. I know a fairly sophisticated investor who does not believe in conversions. He thinks one should always avoid taxes this year. Always. He might allow for a two year calculation, but not for one that depends on estimates of taxation way into the future. Who knows what the future will bring. I have converted about 1/3rd of my IRAs, and may convert a little more. It is a judgment call.

To: Labrador who wrote (5883)	9/21/2010 3:41:03 PM
From: JimisJim	Respond to of 34328

If there's a VAT in the future, it won't matter if your money is in a ROTH or a traditional IRA... you will simply be paying a "national sales tax" and it will eat at any money regardless of its source... unless they make it hopelessly complex with all manner of deductions, etc. to keep all of the tax lawyers and accountants employed... and if that's the case, who really knows how it might affect money coming out of either a ROTH or traditional IRA? Could go either way very easily depending on what the tax lobbyists spend the most money to buy in congress and/or are allowed to actually write the legislation enacting a VAT. Jim