Author Topic: Complicated! Already have a Roth- can I switch to a traditional IRA?  (Read 332 times)

Reddleman

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My wife and I have been socking money away as quickly as possible, but have already maxed out our 401k/403b, my wife's HSA (I'm not eligible), and her 457 and also both have Roths that we started years ago. We essentially live on my income (after taxes).  It's above what Mr. Money Mustache spends a year, but mostly because we still have a mortgage and NYS property taxes.  We try to put as much of hers in tax-deferred as possible. 

Looking at our tax strategy going forward, it makes sense to try to minimize our taxes now, rather than worry about our tax rate in the future.  This is particularly true if any version of the current tax cuts go into place.  Rather than itemize, we'll probably be using the standard deduction.

So it gets complicated. 

1. We'd like to contribute to a traditional IRA to save taxation on current income.  It looks like the maximum income for eligibility is $98k a year for married filing jointly.  It might be difficult to get under that since we're dual income. If we don't file jointly, I'd be able to meet the guidelines as a single filer after my contributions to the 401k/403b.  She wouldn't, because she makes twice as much as me :-).
2.  We can still contribute to the Roths, because we're under the $198k limit, but would rather reduce our taxes now.

So is there any way to have us both contribute, or is there any other way to put away more tax-reducing/tax deferred options I'm not thinking of?

terran

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Re: Complicated! Already have a Roth- can I switch to a traditional IRA?
« Reply #1 on: November 19, 2017, 11:51:38 AM »
You need to look at the married filing separately deduction limits, not the single limits: https://www.irs.gov/retirement-plans/2017-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work -- so you would need an MAGI under $10k to take a full deduction.

Was is your joint income?

If you have a 401k, she has a 403b and 457, and she has a self only HSA plan you could have an income as much as $99k + $18k x 3 + 3350 = $156,350. Any health insurance premiums you or your wife have deducted should also be able to be added back in.

Reddleman

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Re: Complicated! Already have a Roth- can I switch to a traditional IRA?
« Reply #2 on: November 19, 2017, 01:03:06 PM »
Actually, as of this year, our joint income is over $156k, and may pass $200k this year before tax/401k/457/etc.  That's why we're finally running into this problem.  Since we're married and living together, there's no way to separate our income to make me eligible for a traditional, unless I simply quit my job or make under $10k (not likely)

So as far as I understand it, at this point our only option is to both use a Roth, since our AGI/MAGI will probably be somewhere between $120-130k after 401/457/HSA.  I don't see any way to get down to below $100k.  If charitable contributions count, we would be closer.  I don't think we're going to donate $20k a year this year though.  If it would do the trick, we might find a way. 

I don't mean to complain here.  We're extremely lucky to be able to save this much.  But if the government wants to incentivize us to prepare for retirement, I'd like to take advantage of every opportunity!

MDM

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Re: Complicated! Already have a Roth- can I switch to a traditional IRA?
« Reply #3 on: November 19, 2017, 02:17:16 PM »
...I'd like to take advantage of every opportunity!
Putting $54K/yr into traditional, and then $11K/yr into Roth IRAs, would be taking very good advantage indeed.

Reddleman

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Re: Complicated! Already have a Roth- can I switch to a traditional IRA?
« Reply #4 on: November 19, 2017, 05:19:59 PM »
Pretty much exactly what I was thinking.