Another Roth vs. tIRA (2015 & Going forward)

[Frugal_NYC]

I'm probably agonizing more then necessary on this decision but I can't decide which is best.  I know many in the ER community default to T-IRA but I'm not fully convinced my income will be low when I decide to retire (no clue when that will be either) and I also like the flexibility of being able to pull my basis out of the Roth anytime if necessary.

Here's the 2015 rundown

Me: 25 years old, Single, NY, NY

Gross Income: $75,000
401K/IRA: $18,000 (under roth) / $23,500 (under tIRA)
Commuter/Other: $1,617
Net: $55,324 / $49,824

Fed/State/Local Taxes: $10,350
If I switch from Roth to tIRA: $8,560
Savings: approx $1800

Note: Back in January I just dumped $5,500 into my Roth for 2015 (I also maxed it 2013-2014), but I assume I could switch back if necessary.  If it matters, I expect my income to increase significantly going forward.  I expect to be "earning an income" until at least 35-40.  I always figured the Roth was a good hedge since I will be maxing the 401K every year but now not sure.  I guess my big fear is that they close the loophole of converting tIRA to Roth over 5-year period, which I guess even if that happens I saved on my taxes every year and theoretically invested the difference?

[MDM]

I'm probably agonizing more then necessary on this decision but I can't decide which is best.

You can't know which is best because you don't know your future income, what Congress will do to tax law, etc.  But you can make some educated guesses and get on with things.

401K/IRA: $18,000 (under roth) / $23,500 (under tIRA)

Just checking: do you know that IRAs are different from 401ks?  You have an $18K limit for your 401k, which can be used by any combination of traditional or Roth contributions (if your employer has those options).  You have a completely separate $5500 limit for your IRAs and can split that $5500 between traditional and Roth however you choose.  Whether you can deduct the amount put into a tIRA depends on your MAGI for that purpose.  At your income - which is just above the $61K to $71K phase-out for deductible contributions - you may not be able to deduct anything contributed to a tIRA if you don't use a t401k, but could be able to deduct the full $5500 in a tIRA if you ~maximize your t401k.  See http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits.

Note: Back in January I just dumped $5,500 into my Roth for 2015 (I also maxed it 2013-2014), but I assume I could switch back if necessary.

You may easily recharacterize any portion of that to a tIRA before the April tax filing deadline.  With a little more work (i.e., filing an amended return) you can recharacterize it as late as the October amended return deadline.  See https://www.bogleheads.org/wiki/IRA_recharacterization.

If it matters, I expect my income to increase significantly going forward.

It might matter.  Also, if you get married your tax bracket could change (up or down) depending on your spouse's income.  Take your best guess....

[Frugal_NYC]

^^^^

Thanks for the reply.

I was aware about the differention between 401K and IRA, I was trying to illustrate how with the Roth I would get no tax deduction and with the tIRA it's basically the same as if I was putting a total of $23.5K in my 401K (for tax purposes)

I was not aware that $61K was the limit for a full deduction.  How would that affect me going forward (this year or next year would be my last another that threshold) - would Roth be more advantageous then?

[MDM]

How would that affect me going forward (this year or next year would be my last another that threshold) - would Roth be more advantageous then?

If we ignore "non-deductible tIRA" (other than as a gateway to a backdoor Roth), it is not that Roth becomes more advantageous but rather it becomes your only IRA option.

The rule of thumb: traditional if current marginal rate is 25% or higher; Roth if 10% or lower; flip a coin in between (or see   
   http://forum.mrmoneymustache.com/investor-alley/deciding-between-roth-and-traditional-ira-based-on-marginal-tax-rate/
   if you want even more details on that topic).  See also
   http://forum.mrmoneymustache.com/ask-a-mustachian/case-study-overwhelming-student-loan-debt-how-would-you-get-started/msg868845/#msg868845
   and other posts in that thread about exceptions to the rule.