FYI: Ed's a big Roth IRA proponent, so it’s actually tough to write about the reasons not to go Roth. But, as with any other financial decision, there are drawbacks that must be addressed. When he says “Roths,” he's talking about Roth conversions as opposed to Roth contributions. Roth conversions have no income limits, and there are no limits on how much can be converted. Clients can convert all they wish as long as they can pay the income tax.
Regards,
Ted
https://www.fa-mag.com/news/when-roths-may-not-be-right-39880.html?print
Comments
This is largely an artificial distinction. If one shouldn't be converting to a Roth, then one shouldn't be contributing to a Roth either. This is because that Roth contribution is essentially a (deductible) traditional contribution followed immediately by a Roth conversion. And he's saying not to do that second step - the conversion.
Okay, there are minor differences. That Roth contribution for 2018 can be done until April 15, 2019, while if you take the contribute/convert route, it only goes on the record for 2018 if you do the conversion before Dec 31. And while you can't undo a Roth conversion, you can undo a Roth contribution (treating it as a contribution to a deductible IRA). But these minor differences don't affect his major concerns.
Whether the money goes into the Roth from a conversion or a contribution, that amount is going to be taxed as ordinary income. Thus from a tax perspective, there's no difference between converting and contributing directly.
IMHO for many people the biggest reason to keep some pre-tax IRA money around is to be able to make qualified charitable distributions (QCDs). He points this out, but I'd like to emphasize and amplify it.
First, under the new tax laws, it is harder to take charitable deductions, because it's gotten harder to itemize. QCDs get around this problem. Second, unlike taking a distribution and then deducting the contribution (assuming one still itemizes), a QCD reduces top line income. (It gets rid of a taxable distribution.) That can have a favorable effect on how much of SS benefits are taxed, or whether you have to pay IRMAA - an increased Medicare premium due to higher income.