Am I Eligible to Participate in Work Retirement Plan and Traditional IRA?

[Tr10av]

I've done some research on this subject but was hoping for clarification on my situation. I am looking to reduce taxes as much as possible (I know I could reduce taxes even more by contributing additional to the 403b but I am concurrently paying off debt as well) and would like to contribute to both my 403b  and a Traditional IRA as I am planning on retiring early and converting to a Roth through the Roth ladder method.

Below are my projected numbers for 2016:

Gross Income: $70k
403b contributions: $4k
Employer Match: $1k (met max)
Student Loan Interest: $1k

According to the following link https://www.irs.gov/retirement-plans/plan-participant-employee/2016-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-covered-by-a-retirement-plan-at-work as long as my Modified AGI is under $61k I can take a full deduction on my Traditional IRA.

Based on my understanding in the above scenario my MAGI would be $65k. Would my $5,500 Traditional IRA contribution then get me below the $61k mark or do I need to be below $61k before hand to take the full deduction?

Any insight or advice would be appreciated, thanks.

[terran]

No, traditional IRA contributions reduce AGI, but not MAGI. You need to get below the MAGI threshold before the IRA contribution. You may have health insurance payments and the like that would help though.

Why not just contribute to the 403b? How are the fees and investment options? You can always roll the 403b into an IRA after you retire and do the roth conversions from there.

[seattlecyclone]

You have plenty of room to contribute to your 403(b) to bring your MAGI below the IRA deductibility threshold. If and when you max that plan out, a deductible IRA will then be an option.

[Tr10av]

No, traditional IRA contributions reduce AGI, but not MAGI. You need to get below the MAGI threshold before the IRA contribution. You may have health insurance payments and the like that would help though.

Why not just contribute to the 403b? How are the fees and investment options? You can always roll the 403b into an IRA after you retire and do the roth conversions from there.

Yes, now that you say that it makes perfect sense as there really is no difference between money in the 403b vs the IRA from a tax standpoint. The investment options are not the best in the 403b but with the tax savings hopefully that would be negated.

The other benefit to being able to deduct IRA contributions (if possible) would be that I could use money earned from January-April 14th whereas the 403b contributions must be from money earned in the 2016.