Author Topic: Seeking advice: Roth/Traditional, 403(b) rollover  (Read 1077 times)

mrteacher

  • Stubble
  • **
  • Posts: 203
Seeking advice: Roth/Traditional, 403(b) rollover
« on: January 01, 2018, 12:11:40 PM »
Happy New Year!

I have a few IRA/rollover/tax questions. I'd love some input.

1. DW and I have maxed our respective Roth IRAs for the past couple years. However, I've started to wonder if opening Traditional IRAs, and maxing those for the foreseeable future, would be better. Our combined gross income is around $105k. From the figuring I've done, it seems to make minimal tax difference whether we continue to do Roth or switch to Traditional. We are married filing jointly, so we'd have a $24,000 deduction, as well as $18,000 to one 401(k) and $11,000 to the IRAs, $3,000 to HSA...we would be in the 12% bracket. I'm just not so good at estimating where we will be in retirement. I would guess in that same 12% bracket. If that's the case, it'd basically come down to pay taxes now vs. pay taxes later, right?

2. I'd like to rollover both of our 403(b) accounts (opened with both of our former employers) to a Traditional IRA with Vanguard (this is part of the reason I've started to consider going from Roth to Traditional). Does anyone know if we could rollover both her 403(b) and mine into my Traditional IRAs, or if we would each need our own IRA to initiate the rollover?

Thanks!

walkwalkwalk

  • Stubble
  • **
  • Posts: 233
Re: Seeking advice: Roth/Traditional, 403(b) rollover
« Reply #1 on: January 01, 2018, 08:26:51 PM »
1. Correction - 12k for IRAs if one of you is over 50 (6500 and 5500) and yes now vs later is correct. But you also want to be aware of your mix between Roth, traditional and taxable. Having a good  mixture allows you to determine how much income you have in a given year.

2. The I in IRA IS individual the R is retirement and the A is arrangement. So yes individually you need separate accounts.

zolotiyeruki

  • Magnum Stache
  • ******
  • Posts: 3188
  • Location: State: Denial
Re: Seeking advice: Roth/Traditional, 403(b) rollover
« Reply #2 on: January 02, 2018, 08:16:11 AM »
If you can get into the 12% bracket without a traditional IRA deduction, then a Roth is the right path IMO.  Keep in mind that if you have plans to RE, you'll need to have access to some of your funds until you hit 59.5 years old.  Roth contributions can be withdrawn penalty- and tax-free, so they can be a part of your pre-59.5 income.

mrteacher

  • Stubble
  • **
  • Posts: 203
Re: Seeking advice: Roth/Traditional, 403(b) rollover
« Reply #3 on: January 02, 2018, 08:22:14 AM »
1. Correction - 12k for IRAs if one of you is over 50 (6500 and 5500) and yes now vs later is correct. But you also want to be aware of your mix between Roth, traditional and taxable. Having a good  mixture allows you to determine how much income you have in a given year.

2. The I in IRA IS individual the R is retirement and the A is arrangement. So yes individually you need separate accounts.

We are in our late 20s. Good point about mixture of accounts.

walkwalkwalk

  • Stubble
  • **
  • Posts: 233
Re: Seeking advice: Roth/Traditional, 403(b) rollover
« Reply #4 on: January 02, 2018, 10:45:25 AM »
Oh I am sorry. You meant standard deduction. I read that as 24k for 401k (which would now be for 2018 24,500 so of course it couldn't have been that)

mrteacher

  • Stubble
  • **
  • Posts: 203
Re: Seeking advice: Roth/Traditional, 403(b) rollover
« Reply #5 on: January 03, 2018, 12:59:25 PM »
If you can get into the 12% bracket without a traditional IRA deduction, then a Roth is the right path IMO.  Keep in mind that if you have plans to RE, you'll need to have access to some of your funds until you hit 59.5 years old.  Roth contributions can be withdrawn penalty- and tax-free, so they can be a part of your pre-59.5 income.

Makes sense.

I think we would be right on the edge of the 12%/22% bracket without a traditional IRA deduction. What's your 'crossover' point where you would go traditional IRA?

zolotiyeruki

  • Magnum Stache
  • ******
  • Posts: 3188
  • Location: State: Denial
Re: Seeking advice: Roth/Traditional, 403(b) rollover
« Reply #6 on: January 03, 2018, 02:07:26 PM »
If you can get into the 12% bracket without a traditional IRA deduction, then a Roth is the right path IMO.  Keep in mind that if you have plans to RE, you'll need to have access to some of your funds until you hit 59.5 years old.  Roth contributions can be withdrawn penalty- and tax-free, so they can be a part of your pre-59.5 income.
I think we would be right on the edge of the 12%/22% bracket without a traditional IRA deduction. What's your 'crossover' point where you would go traditional IRA?
Under the old tax brackets, for the crossover is at the 15/25% threshold, under the new brackets it'd be the 12/22% threshold.

Let's take your specific case.  Start with $104k, subtract out $45k for 401k/standard deduction/HSA, and you get $59k.  That's well within the 12% bracket, even without a traditional IRA contribution.  I'd suggest contributing that $11k to Roth IRAs.