It Does Not Pay to Roth Your IRA

by KYW's Salil Gutt

Retirement accounts have been battered. Some financial advisors and articles in the financial press have been talking about converting IRA's to Roth IRA's. This is to avail of the long term tax free benefits of Roth IRA's while converting at a favorable time.

In my opinion converting existing IRA's to Roth IRA's benefit your heirs, not you. Here are some reasons to support that conclusion.

First. You have to front the money from savings to pay the taxes. You have lost the ability to use these funds.  Next. IRA's are designed so that minimum required distributions start at age 70 and all of the money is spent down by age 115. On the average there is still a very healthy chunk of money left in the IRA when both spouses die.

The point. The two of you do not fully realize the tax benefits from prepaying those taxes today. 

And finally. As we age, increased medical deductions start to offset taxable income distributions from retirement plans.  All in all, it often does not pay to Roth your IRA.