What would be more financially beneficial? ?

Question

Purchasing a coop or condo or converting my IRA to a Roth IRA? (Additional info: I pay low rent $900 per month in NYC, real estate priced in NYC are still sky high, my annual salary is middle class, and the IRA conversion would have to take place over several years) as it involves converting approx. $185,000)

Answer 1

If you are older than 50, converting your traditional IRA to a Roth may not be as beneficial as it would be for someone younger.  The greatest benefit from a Roth comes from the ability to accumulate potentially tax-free earnings.  The younger one is, the greater the opportunity to accumulate earnings and the greater the percentage of the account balance that would be comprised of earnings.

Real estate might be more beneficial depending on your time horizon.  Whether in New York or any place else, this should be considered a long-term investment.  How long do you plan to keep the co-op or condo?  If the answer is 7-10 years, you have a good chance of getting a good return.  But nothing with real estate is certain, and with oil becoming more scarce, real estate in the northern climes may become less popular in the future.

If you are younger, say in your early 30s, I would recommend the Roth conversion.  If you are older than that, estimate what your Roth has the potential to earn over the period of time you expect to keep the account before drawing on it, and try to determine if the tax treatment will be more beneficial for you.

Answer 2

purchasing the coop or condo.  NYC real estate always increases in value at greater percentages then any other investments.  Add to that the tax write offs and you can't lose.  Have watched NYC real estate for close  to 40 years.