A question pertaining to Roth IRAs...

[il Padrino Ute]

I had the radio in my car on while I ran to buy some milk for tomorrow morning's breakfast cereal....ok, I also got myself a refill of Barq's rootbeer, but I digress...

anyway, the radio was on and I heard some folks talking about rolling a 401K into a Roth IRA with gold backing. Has anyone else heard of this? If so, what would be the pros/cons?

Thanks in advance to all you financial gurus out there.

[Archaea]

Don't forget Roth IRAs have limitations on how much money you earn. Gold backing? Ask a financial analyst.

[hyrum]

Originally Posted by il Padrino Ute

I had the radio in my car on while I ran to buy some milk for tomorrow morning's breakfast cereal....ok, I also got myself a refill of Barq's rootbeer, but I digress...

anyway, the radio was on and I heard some folks talking about rolling a 401K into a Roth IRA with gold backing. Has anyone else heard of this? If so, what would be the pros/cons?

Thanks in advance to all you financial gurus out there.

Not a financial professional or guru, but here's my 2 cents...

I read an article recently that said there was a window going to be open in 2010 where anyone could roll a regular IRA into a Roth. They were suggesting one shoud open a reg post-tax IRA now (if one is not now eligible for pre-tax IRA or Roth) and then roll it into a Roth in 2010.

One thing is I figure unless I die penniless only a small portion of those funds will be taxed... the income that I actually withdraw and use. At least a portion of that will be a rate lower than my current marginal tax rate. When a person rolls into a Roth they have to pay tax on all gains right then and there -- and at a (presumably high) marginal tax rate which reduces the capital immediately and significantly (if you've had any sort of gains in 3 years, plus the fact that its after-tax money). Also I don't know that there is an ironclad gaurantee that the Roth won't be taxed at some point in the distant future when the govt gets hard-up after the Baby Boomers drain the Treasury (in other words, a tax deferred indefinitly is better than a no-tax promise to me). Anyway, the main tax benefit is then for your heirs. I say make them pay the tax on the windfall at that point.

As far as the "gold backing", there are lots of ways to have proxies for gold in your investment account. While at certain periods of high inflation gold can do well, over the very long term I believe you're still best off to have the lions share of your investments in good common stocks. Any sort of "insurance" or loss-limit gaurantee is bound to come at a cost to the net gains over time.

[il Padrino Ute]

Originally Posted by hyrum

Not a financial professional or guru, but here's my 2 cents...

I read an article recently that said there was a window going to be open in 2010 where anyone could roll a regular IRA into a Roth. They were suggesting one shoud open a reg post-tax IRA now (if one is not now eligible for pre-tax IRA or Roth) and then roll it into a Roth in 2010.

One thing is I figure unless I die penniless only a small portion of those funds will be taxed... the income that I actually withdraw and use. At least a portion of that will be a rate lower than my current marginal tax rate. When a person rolls into a Roth they have to pay tax on all gains right then and there -- and at a (presumably high) marginal tax rate which reduces the capital immediately and significantly (if you've had any sort of gains in 3 years, plus the fact that its after-tax money). Also I don't know that there is an ironclad gaurantee that the Roth won't be taxed at some point in the distant future when the govt gets hard-up after the Baby Boomers drain the Treasury (in other words, a tax deferred indefinitly is better than a no-tax promise to me). Anyway, the main tax benefit is then for your heirs. I say make them pay the tax on the windfall at that point.

As far as the "gold backing", there are lots of ways to have proxies for gold in your investment account. While at certain periods of high inflation gold can do well, over the very long term I believe you're still best off to have the lions share of your investments in good common stocks. Any sort of "insurance" or loss-limit gaurantee is bound to come at a cost to the net gains over time.

Thanks for that info. I also agree that it's best to have more invested in good stocks. I just found it interesting that having gold backing was an option.