IRA contributions and related questions.

[Rollin]

I have an IRA in my name and a second one in my DW's. This year we have a very low taxable income (FIRE date was 2016 with high tax rate), but I'm thinking of lowering it more.

Should I contribute the max $6,500 to my IRA for 2017?
Can I also contribute to my DW's for 2017 (total $13K), or are we limited (married, filing jointly) to only $6,500?

The second question relates to overall tax strategy. I have approximately $400k in IRA's and $150K in taxable accounts. I am withdrawing 4% of the total, but the money is coming from the taxable account (i.e., not touching the IRA). I am 56 (DW is 57) and when I turn 61 I will have a significant increase in income (last ballon payment on a house I have sold, but retained the mortgage) and then the next year we can kick in Social Security. So, I only need the 4% for about 3 years more, and after that I can let it sit and work for me.

Assuming I can contribute to one or both IRA's, should I? That is, should I try to shift as much from the taxable as possible to the IRA's over the next three years.  I'll only need about $60k of the $150 over the three years.

That may shift more tax burden to when we are receiving more income after 62, but I thought it would be worth it to reduce taxes for the next three years.

[ritz]

Do either of you have earned income for 2017? You need earned income to contribute to IRAs.

[Rollin]

Do either of you have earned income for 2017? You need earned income to contribute to IRAs.

We both operate businesses, but the income will be offset by costs (overall losses against costs). Plus I have a pension coming in. I guess the taxes we pay on the earnings for the taxable account are not considered earned income, nor is the interest on the mortgage repayment.

[MDM]

That may shift more tax burden to when we are receiving more income after 62, but I thought it would be worth it to reduce taxes for the next three years.

You could defer SS until age 70 or so, giving you many more years (other than the one year with the balloon payment) to convert from tIRA to Roth at lower tax rates.

[Rollin]

That may shift more tax burden to when we are receiving more income after 62, but I thought it would be worth it to reduce taxes for the next three years.

You could defer SS until age 70 or so, giving you many more years (other than the one year with the balloon payment) to convert from tIRA to Roth at lower tax rates.

Good point MDM. Just because we get a "raise" in income doesn't mean we need to spend it (or even receive it).

[Rollin]

I think I found the answer to my first question ($6,500 vs. $13,000) and it is limited to $6,500. Additionally, that has to weigh against our earned income. We should have enough to put in the max.

Does anyone know if you can do a cumulative Traditional IRA plus a ROTH IRA? That is contribute the max to both?

[MDM]

I think I found the answer to my first question ($6,500 vs. $13,000) and it is limited to $6,500. Additionally, that has to weigh against our earned income. We should have enough to put in the max.

It's $6500 per person (so $13000 total for the two of you), still subject to the earned income constraint.

Does anyone know if you can do a cumulative Traditional IRA plus a ROTH IRA? That is contribute the max to both?

Don't understand how the word cumulative applies, but
- yes one can have both traditional and Roth IRAs,
- but the $6500/person applies to the total of all IRA contributions.

E.g., an individual could contribute $1234 to a traditional and $5266 to a Roth, or any other combination (including $0 to one or the other), but not more than $6500 total.  People under 50 are limited to $5500.

[Rollin]

Yeah I was out riding the bike today and that word )cumulative( came up for me too! Maybe additive would have been better.  Either way, you answered my questions. Thank you MDM!