Fearful they’ll buy or sell stocks at the wrong time, many investors move slowly—but selling slowly increases risk.
The table shows that the Traditional IRA would have been the better choice, producing about $3,500 more in available funds, or about 22% more. This demonstrates that the primary driver in choosing between a Roth and a traditional qualified account is a consideration of the tax rates at the time of contribution and at the time of distribution. There have been a number of changes to the tax code in the last decade that have contributed to the result, but I certainly didn’t predict any of them. If you guess wrong, you pay the price in a higher tax bill. In the example above, the extra $1,750 invested in the traditional account produced an additional $6,143.31 in earnings. The lower tax rate at the distribution of the traditional IRA results in the $3,500 in extra funds. Even though the Roth IRA had tax free earnings growth, the initial larger tax rate overcame that advantage, when compared to the traditional IRA. Because of my pension and my wife’s social security benefit, 85% of her social security benefit is taxable income, so that is not a consideration in our tax calculation. I used Dinkytown’s 1040 Calculator to run a series of estimates of our 2026 tax return to assess if we want to execute a Roth Conversion this year. We are still 4 years from taking RMDs, and I will start my Social Security in a year when I turn 70. My current thinking is a conversion of about $40,000 will keep us in the 12% bracket. There would also be a small NJ state tax impact. My simple analysis reinforces what I’ve been taught. Roth contributions make the most sense when you think your current tax bracket is lower than when you expect to withdrawal the funds. There are secondary considerations, like no tax diversification, no RMDs, and uncertainty about future tax rates. If you intend to pass the funds to heirs, it might make sense to perform Roth conversions today at the 22% tax bracket if you intend to pass these accounts to heirs who may be in their peak earnings years. Not sure? I believe I recall several HumbleDollar contributors write something about splitting the difference?
Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.
Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles. NO. 24: OUR ONLY earthly immortality will be the memories of others. We should make sure those memories are good—by spending our wealth on special times with friends and family.
NO. 26: WE TEND to be overconfident—which isn’t a bad thing. Self-confident individuals tend to be happier, have a wider circle of friends and enjoy greater career success. Problem is, if we’re too confident in our financial abilities, there’s a risk we’ll rack up hefty investment costs and make big undiversified bets, both of which could come back to haunt us.
PASCAL’S WAGER. Belief in God is rational, argued Blaise Pascal. If you believe and God doesn’t exist, the price is modest: a less immoral life. But if you don’t believe and God does exist, the price is far higher: an eternity in hell. The lesson? When managing money, we should focus less on the odds of something happening and more on the consequences.
NO. 86: CARRYING a mortgage into retirement can cost a heap of taxes. To cover the monthly payment, you might sell winning investments in your taxable account or tap retirement accounts, thus boosting your taxable income. That, in turn, could trigger higher Medicare premiums and taxes on your Social Security benefit. Result: You suffer a double tax hit.
NO. 24: OUR ONLY earthly immortality will be the memories of others. We should make sure those memories are good—by spending our wealth on special times with friends and family.
When my wife asked for a hint for the Father’s Day present I was hankering to get, I was stumped for a day or so. I don’t need a new tie or wallet, or the new garden tool that I sometimes suggest. My eventual answer didn’t surprise her, but she was amused. I’ve asked my daughter to answer two questions: What’s the origin of Father’s Day in our country, and does she think it’s worth observing?
As I sit here on what the media is calling “Super Saturday” (?!?), I can’t help but wonder, am I the boring aunt? My husband and I are childfree by choice but we are blessed with five awesome nieces and nephews, consisting of 21 month old twins through 7 years old. I love the Christmas season but as a society, we’ve lost something with all the commercialism and commoditization of this great holiday. Thus, we give the kids money for birthdays and holidays.
I noticed a bit of a trend over the summer at my holiday home. Suzie and I were a part of it, as our 10 year old grandson stayed with us for a large portion of the school holiday period. It was wonderful to see so many grandparents helping out in this way.
Our holiday community is gated and has a large play park with extensive grassy areas and a few soccer nets for the kids.
BASIC ECONOMICS teaches us that scarce commodities are more precious. This holds true for metals, rocks, food—and time. Which brings me to today’s topic: Time spent with my daughter and only child has reached the rare and precious stage.
In summer 2023, scarcity was far from my mind. My daughter and I traveled to visit Grandmama—my mother—five hours’ drive south of our home. The visit itself was short and mundane, with just the usual catching up with my mother and tending to her business.
If you thought my posts on family estrangement and supporting adult children were doozies, wait until you dig into this one.
My musings on all three of these topics are specifically related to how complicated the interaction between family dynamics (especially if it’s a “difficult” family) and our finances can be. This one focuses on how caring for parents as they age can raise challenging questions.
Like many of you, I’m at the stage of life where I view these questions both as a daughter and as a parent.
Suzie and I have been together for 44 years and married for 36 of them. It goes without saying that a relationship of that length is achieved by many means, but I think a fundamental characteristic is the ability to compromise and be mindful of each other’s wishes.
A strong partnership where both people work can also supercharge wealth generation through the decades, especially if you both think in lockstep on humble lifestyle choices and the importance of saving for the future.
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