Its been a crazy year! I ran into MMM and this forum about 8 months ago and since then have dramatically changed my spending and savings habits. For the first time, i'm contributing to retirement accounts and saving money!
One of the amazing things is what all of this savings is doing to my 2013 tax outlook! With that in mind though, i'm wondering what the best approach is regarding my newly funded Roth IRA. I opened it up this year, and am on track to fully fund it. The Roth seems to be very popular and when I opened it i was sort of just starting out on my path to FIRE and the Roth seemed to be what all the cool kids were choosing. However after doing some research, and after reading this analysis from the Mad Fientist-
http://www.madfientist.com/traditional-ira-vs-roth-ira/ I'm wondering if I shouldn't consider recharacterizing it to a traditional IRA in order to further decrease my taxable income.
Here is my current tax situation (i'm 29, married, with two kids):
Married Filing Jointly:
2013 Gross Income: ~$91,000
Subtract deductions from HSA, SIMPLE IRA- $17,400
Subtract standard deduction- $12,200
Subtract student loan interest deduction ~$30
Subtract 4 Exemptions ~ (4 x $3,900) - $15,600
TOTAL Taxable Income: $45,770
I think this math is right, but feel free to point out any errors. That is pretty low already, but it seems that I can fully deduct a traditional IRA, and further reduce my taxable income, getting some additional tax dollars back (that I can turn around and invest further) Then, when i get closer to FIRE, open up a Roth and start slowly converting the money.
I guess my question is, am I missing anything? Are there other reasons why a Roth right now might be better in my circumstance? Why do other folks favor the Roth? I have a emergency fund/house down payment fund and am also putting money into a taxable account, so i have a pool there in case I need to withdraw money for any reason. I realize this is largely about personal preferences and there probably isn't a wrong answer but the Roth option seems to be really popular and widely recommended, so I wonder if I'm not foreseeing unintended consequences of recharacterizing. I apologize if this topic has been brought up a ton already!