Roth or IRA? 58 y/o and currently unemployed

[MinimalistMoustache]

I became ill during the summer last year, and I wasn't able to return to my job. Now recovered and seeking to re-enter the workforce. No debt, some liquid savings (20K+), some retirement (100K+) and a small Roth (10K+)

In filing 2014, I'm unsure whether to contribute to Roth, IRA or neither. When I was employed, the plan was to fund the IRA (traditional) from my cash which had started to build up quickly. The benefit of the IRA contribution would more than double my refund, which could go back into savings. Or I could put it in the Roth, as I don't anticipate needing it before I turn 59 1/2.

While I'm hopeful in securing employment, I'm uncertain and feeling hesitant. My indecision has delayed my tax filing.

Any suggestions are much appreciated. Thanks!

[MDM]

Filing status (e.g., single, married filing jointly)?

Current AGI?

Current taxable income?

Current tax?

"Current" = without any IRA deduction.

[frugaldrummer]

Need a little more information. What's your annual spending like? Are you anticipating any pension in retirement? Do you know roughly how much social security you will receive?

I ask because it makes a big difference how you handle this. If your expenses are high and anticipated pension/soc security low, then I would hold onto the cash until you have a new job. If your retirement is already looking pretty good thanks to a pension or good soc security and low expenses, then you can probably afford to tie that money up in an IRA.

[MinimalistMoustache]

I appreciate your responses.

I file single. Social Security would be approximately 1,200/month @ age 62; it increases to about 2,300/month at age 70. No pension. My savings had just started to increase (once I stopped enabling everyone around me - LOL!) before losing my ability to work. My take home monthly was approximately 3,200 after taxes and insurance. I was able to live comfortably on anywhere from 35%-50% of that each month.

Even with all the cutbacks, I still manage to save a little each month. Though I don't anticipate high expenses, I can't be certain. Living in Seattle can be pricey, especially regarding decent rental housing. My plan to throw everything at the 401K with the employer's match got sidetracked by the illness. I'm very thankful to be feeling healthy again and just need a new plan of action. 

Thanks!

[rpr]

If your income was really low in 2014, than the Roth is a good idea. Plus you may be eligible for saver's credit. Good luck with your job search. Can you go back to your old place of employment or do you need to look for a new one? 


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[MinimalistMoustache]

Thanks rpr! Just missed the saver's credit by about 4,000. Since writing the initial post, I'm starting to sway towards the Roth too. :-)

My doctor recommended it best that I seek alternative employment. I had the option of returning to the former job, but knew I couldn't sustain the stress anymore. I hung in there a few years despite witnessing high turnover. It was one of the toughest jobs I've ever held. Relieved to be feeling better and eager to move on.

[frugaliknowit]

With just 20K in liquid and no job, I would not contribute to an IRA before securing employment (hope for the best, plan for the worst).  Certainly, if you get a job by April 15, run to the bank and contribute to a 2014 Roth.

You still have the opportunity to contribute to a 2015 IRA now or after April 15.