Roth Or Traditional IRA

[KarefulKactus15]

Hello all,
Heres my situation,

1.) 110k Gross income, married filing joint
2.) Maxing out mine and spouses 401k at 18k each for a total of 36k

I'm thinking traditional IRA 5500 each for a total of 11k  is the best choice to max out this year based on the income. Does anyone see a reason to go with the roth at this time?

[forummm]

Unless you plan to have a high income in retirement, the traditional is probably best for now. It appears as though your modified AGI will be below the $98k MFJ threshold for full IRA deduction.

[KarefulKactus15]

excellent!   Yeah I wanted to add that I *thought* the 401k deduction would get counted to bring it down below 98k. But I was honestly a little embarrassed for not knowing lol.   Now just for thought,  does it make sense to go the roth if your above the 118 magi income limit?

[JLee]

excellent!   Yeah I wanted to add that I *thought* the 401k deduction would get counted to bring it down below 98k. But I was honestly a little embarrassed for not knowing lol.   Now just for thought,  does it make sense to go the roth if your above the 118 magi income limit?

At that point you can't deduct the Traditional IRA, so Roth would be the way to go.

[KarefulKactus15]

Okay With my current understanding I crunched the numbers based on my estimated future income, and estimated future taxes here was my conclusion. After 6 years at 8 % return here is the total account value in each.

Tradtional: 87,148$
Roth: 69,719 
Total difference : 17,429$

So I just did about 30 minutes of number crunching to realize one way gives me an estimated 17,429$ more.  I was practically paying myself 34,858 an hour lol.   
Anyway the longer you extend it past 6 years, the more dramatic the number gets (Traditional seems to always be taxrate ahead of the roth lol, 20% for my basic calculation). This assumes you stay below the beginning phase out and cut off for the traditional deduction. I didnt do any math for that way since I dont see my magi getting that high.    As always I could have made an error in calculation, Im known to do this from time to time.

[MDM]

After 6 years at 8 % return here is the total account value in each.
Tradtional: 87,148$
Roth: 69,719 
Total difference : 17,429$

Account value is one thing.  Spendable amount is another.  How much do you expect to pay in taxes when you withdraw from the traditional account?

[KarefulKactus15]

I see where your going.  I don't have an exact value, but im expecting it to be lower then the rate I'm paying now while working. Also hopefully I spend as little as possible so the tax deferred amount can continue to compound uninterrupted by me spending it.

[MDM]

...expecting it to be lower then the rate I'm paying now while working.

In that case, traditional will be better for you.

Also hopefully I spend as little as possible so the tax deferred amount can continue to compound uninterrupted by me spending it.

If it grows enough, you could have the "problem" of having so much that withdrawals put you in a higher tax bracket.  If that happens, you (or your heirs) will wish the money had been put it a Roth. ;)

See http://forum.mrmoneymustache.com/investor-alley/deciding-between-roth-and-traditional-ira-based-on-marginal-tax-rate/ for more on this.