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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: BornNotSworn on March 13, 2019, 11:50:31 AM

Title: Funding tIRA from Roth IRA or HSA
Post by: BornNotSworn on March 13, 2019, 11:50:31 AM
I want to fill up my traditional IRA contributions for 2018 for the tax deduction but I don't have much cash on hand. The two main options I have been considering are taking out old contributions from my Roth IRA and reimbursing old medical expenses from my HSA. I'm having a hard time thinking of much of a reason it matters which I use since neither would be a taxable event and there are no RMD issues (don't care about Roth RMDs after I die). Both IRA and HSA are invested in similar assets. Are there any significant differences I am missing that might sway me one way or another?

Edit: I am assuming that I will pay little to no taxes on tIRA withdrawals as my expected retirement income will be relatively low and my current income is much higher.

Title: Re: Funding tIRA from Roth IRA or HSA
Post by: ixtap on March 13, 2019, 11:55:21 AM
Why would you take money a tax sheltered account to put it into an account that will require you to pay taxes down the road?
Title: Re: Funding tIRA from Roth IRA or HSA
Post by: bacchi on March 13, 2019, 12:08:43 PM
Why would you take money a tax sheltered account to put it into an account that will require you to pay taxes down the road?

+1

Do the math, OP. It makes no sense.
Title: Re: Funding tIRA from Roth IRA or HSA
Post by: dandarc on March 13, 2019, 12:15:05 PM
Why would you take money a tax sheltered account to put it into an account that will require you to pay taxes down the road?

+1

Do the math, OP. It makes no sense.

Exactly - a lot of strategies abound on how to get money from traditional to Roth IRAs while minimizing the tax impact. Only way this question makes sense would be if OP is expecting a very high income later in the year, but then I'd ask why finding $5500 is such a challenge.
Title: Re: Funding tIRA from Roth IRA or HSA
Post by: BornNotSworn on March 13, 2019, 01:03:12 PM
I don't plan on paying much taxes if any on the tIRA since I expect my retirement spending to be sufficiently low whereas now I am in the 25% tax bracket. The question of whether it makes sense to get the tax break now or later depends on those assumptions so sorry that I didn't include that information.
Title: Re: Funding tIRA from Roth IRA or HSA
Post by: MDM on March 14, 2019, 09:59:19 PM
I don't plan on paying much taxes if any on the tIRA since I expect my retirement spending to be sufficiently low whereas now I am in the 25% tax bracket. The question of whether it makes sense to get the tax break now or later depends on those assumptions so sorry that I didn't include that information.
With the assumption of single filer, 24% bracket, your adjusted gross income is at least $94.5K.

If you don't have $5.5K available, there may be bigger problems than deciding whether to rob the HSA/Roth to pay the tIRA.  If you can find the money, are you eligible to deduct a tIRA contribution?
Title: Re: Funding tIRA from Roth IRA or HSA
Post by: BornNotSworn on March 20, 2019, 10:32:02 AM
Married filing jointly. We would be in the 22% bracket I believe which starts at about 77K. I think in retirement we would be in the 10% or 12% bracket at most so I think the numbers work out unless you make very large growth assumptions. I have maxed out my HSA, 401k, and IRA for the last 10 years straight with the exception of this year when I made a large business loan which makes me temporarily cash poor but I don't see how that is relevant to the question of whether or not I should use HSA or Roth funds to fund a tIRA.