Author Topic: Roth vs Traditional IRA question  (Read 2610 times)

Travis

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Roth vs Traditional IRA question
« on: July 14, 2018, 01:05:49 PM »
I'm still studying ways I can save on taxes in the near and far term and I have a question.

Married Filing Jointly
Age 38
One child
Current household income: $98,400
Occupations: Army officer & admin asst
FIRE date: 2023-2025

We both max out our Roth IRAs, my TSP, and put 90% of my wife's paycheck into her 401k (to the tune of about $10k/year).
There's a strong chance I'll retire with a pension worth $40-$60k/year.  Between this and my investment accounts (currently up to $900k) I'm concerned that I'm not going to have any tax space in my retirement to do a Roth conversion ladder.  Is there any benefit to me stopping contributions to my Roth IRA and starting up a TIRA?  I'll know in 2 years if I'm going to qualify for the pension, and a year after that how much it'll be worth.

gocurrycracker

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Re: Roth vs Traditional IRA question
« Reply #1 on: July 17, 2018, 02:56:53 PM »
The pension fills up your 0% and (most/all of) 10% tax brackets.

In this case you'll want to look at your marginal tax rates. If you contribute to a Traditional now, do you save 12% or 22% or more?

When you would do a Roth conversion, what will be the tax rate? 12%? 22%? Or more.

If the conversion tax rate is the same or higher than the contribution rate, than do Roth now.

This same question applies to TSP and 401k. Some of those contributions could be Roth as well.

This post might help with thinking through it:
https://www.gocurrycracker.com/is-your-401k-too-big/

The other factor is health insurance. If you are on an ACA plan in early retirement, those conversions will impact your ACA subsidies, if applicable. This boosts your marginal tax rate you would use in the above analysis.
https://www.gocurrycracker.com/obamacare-optimization-vs-tax-minimization/

Travis

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Re: Roth vs Traditional IRA question
« Reply #2 on: July 17, 2018, 11:19:39 PM »
[deleted post because I found the answers I was looking for]

We're going to stick with contributing to our Roth IRAs until we retire, but then we plan on doing Roth conversions on my TSP and her 401K when we retire. 


« Last Edit: July 21, 2018, 05:26:43 PM by Travis »

gocurrycracker

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Re: Roth vs Traditional IRA question
« Reply #3 on: July 23, 2018, 01:52:25 PM »
sounds like a solid plan.

DMagu

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Re: Roth vs Traditional IRA question
« Reply #4 on: October 23, 2018, 12:09:41 PM »
I am 61 and retired with significant assets in both traditional iRAs and Brokerage accounts totalling 25 years of estimated expenses with inflation

Does a Roth Conversion make any sense for me of any consequence or have i missed the real window for it to be meaningful

General responses greatly appreciated

gocurrycracker

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Re: Roth vs Traditional IRA question
« Reply #5 on: October 23, 2018, 10:25:48 PM »
I am 61 and retired with significant assets in both traditional iRAs and Brokerage accounts totalling 25 years of estimated expenses with inflation

Does a Roth Conversion make any sense for me of any consequence or have i missed the real window for it to be meaningful

General responses greatly appreciated

Replied here:
http://forum.gocurrycracker.com/index.php/topic,43.0.html