Author Topic: Roth or traditional for 2014  (Read 991 times)

KCM5

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Roth or traditional for 2014
« on: February 13, 2015, 12:20:44 PM »
Last year I contributed $4800 to a Roth IRA with Vanguard. And someone's recent question of recharacterizing Roth contributions as traditional got me thinking.

We had a semi substantial change in income in 2014 (husband went from school to working full time). Nothing huge - I think the overall increase was $20,000 but it was enough to push our AGI to 63,000. But we also lost that super lucrative college tuition credit. So I'm feeling like we paid a bit more in taxes than I'm used to and am wondering if I should try to reduce it.

I think if I made those Roth contributions traditional we would qualify for the savers credit, right (10% of up to $4000 for married filing joint incomes under $60,000)? And reduce AGI to reduce taxes by somewhere around $700.

Other things to consider: the majority of our retirement savings are in 457s so they're mostly pre-tax except about 10 grand in Roth IRAs. Is it prudent to have almost all pretax savings? For 2015 we've substantially increased our 457 savings to we'll be under 60 grand AGI. So we're going to continue to use the Roth in the future, I'm just wondering if we should make an exception for last year.

MDM

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Re: Roth or traditional for 2014
« Reply #1 on: February 13, 2015, 12:40:02 PM »
Because there are no age restrictions to access 457 money, don't worry about having "too much" in pre-tax accounts.

As for Roth vs. Traditional, getting the extra Saver's Credit probably tips the scale to Traditional.  But you can check the exact effect by doing your tax return both ways.