Do I understand the Roth IRA correctly? What am I missing?

[Jason Thomas]

I'm exploring my options to roll over a 401k from an old employer and want to make sure I am understanding the basics here. I realize that I'll need more specific and detailed advice from my own advisor, but the expertise of this community would be great appreciated. The total of this fund is about $120k.

Moving it to a traditional IRA I would retain all $120k, but pay taxes on my withdraws, both principal and earnings, based on my tax bracket at the time I withdraw it after age 59.5. If I invest and create passive rental income that allows me to withdraw $5k per month I will only get to keep less than $4k of that because I will be taxed at a rate corresponding to an annual income of $60k. Correct?

Moving it into a Roth IRA I would pay income tax on it right now, which, if I did the math correctly on the income tax, would leave me with about $93k in that Roth. Now, If I take that $93k and create the same passive rental income to the point that I can withdraw the same $5k a month after 59.5, I would get to keep the entire $5k/month - $60k/yr. I wouldn't have to pay any income tax on it at all because I already paid taxes on my original deposit and earnings in the Roth are tax free. Correct?

That seems way to simple. Can I really take that 401k, roll it over to a Roth IRA and then not pay any taxes on withdraws after 59.5 years old. If my rental investments are successful, I could live virtually tax free after the age of 59.5.

Please help! What am I missing?