The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Hedge_87 on July 01, 2016, 03:00:58 PM
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Our numbers
Me age 28
Claim married and 3 on my W-2
Income as of 2015 $94,382.84
Contributing $18,000 a year to 401k with 6% match
I have a pension plan that is 100% vested
I have access to a cafeteria plan (put in $2040 this year for baby coming) and a dependent care plan (put in $2760 this year) to hide some more income if we expect to have medical expense.
I also have a small amount in a roth IRA I haven’t contributed to in years.
My wife age 32
Claims single and 0 I believe.
Income as of 2015 $38,924.36
Works as a teacher so has access to a 403B, 457, and pension plan
I am currently trying to get more information on her retirement account options to see what type of funds she has available to her.
We have one four month old and are planning to try and get number two going in the next few months.
Our mortgage is about 80k at 4.3% for 30 (started in 2014). I am currently looking at a refinance to a 15 at 2.9%
My wife has about $20k left on her student loans but we are waiting two years to get these paid off due to the teacher loan forgiveness program.
Other than that we have no debt and keep around $4k in the checking account $10k in savings as an “emergency fund”. And have another $10k I have been saving up for when the little guy showed up incase there were complications or anything. Luckily he is a very happy and healthy little dude.
My question is what would be the most tax efficient way to fill up our retirement accounts and should we go with traditional or Roth IRA’s
My thoughts are
Continue maxing out my 401K
Max out IRA’s for both of us using the money we stashed for baby stuff. Not sure if I want to do roth or traditional here.
If my wife has good options in her 403B work towards maxing it
Once I gain understanding of her 457 plan max it
All else goes to taxable accounts.
I know I am supposed to use tax advantaged plans first just not sure which way to go first and if I should be doing a roth or traditonal on the IRA's. Any help is much appreciated. Also If anybody has some good resources to learn how to figure the tax parts out on my own I would appreciate it.
ETA
So I've been playing with a tax calculator online using our information from our 2015 tax return.
If we do not contribute any money to pre tax retirement accounts I get the following
Total Income= $112,986
Taxable income= $80,169
Income tax= 10,630
which puts us in the 25% tax bracket on about $5,269 of our income. So if we put that in a pretax account we would only se about $3,951.75 out of our yearly take home pay correct?
Anything after that would be in the 15% tax bracket. while I can see the advantage of hiding more money even from the 15% bracket (which i intend to do once I find out more about my wife's options in her plans) this is the tax bracket we will be in in retirement. would it be better to have some of our money in a roth type account? We could access our contributions penalty free If things got tight later on (I'm hoping very unlikely catastrophe type event that pretty much bankrupts us) and, I have an old roth account I could rollover into a new fancy vanguard one. Thoughts?