Author Topic: When to fund my 2018 tIRA and Roth IRA?  (Read 1241 times)

frugalnacho

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When to fund my 2018 tIRA and Roth IRA?
« on: December 21, 2017, 07:21:58 PM »
I have $11k set aside ready to invest in our 2018 IRAs.  My plan is to contribute to our tIRA to get us down to $0 federal tax liability, and then put the rest in ROTH.  I don't know how our income is going to shake out exactly for 2018 though.   I'll be maxing my 401k, HSA, and FSA ($18.5k, $6.4k, and $2.65k).  That should get our AGI low enough to qualify for a tax savers credit.  And we now have 1 child so I'll get the refundable child tax credit next year.   

Should I just make an $11k contribution to our tIRA on January 2nd, then re-characterize in December when I know the exact amount needed?

Any other approach I should consider?

MDM

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Re: When to fund my 2018 tIRA and Roth IRA?
« Reply #1 on: December 21, 2017, 11:26:31 PM »

tralfamadorian

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Re: When to fund my 2018 tIRA and Roth IRA?
« Reply #2 on: December 22, 2017, 03:52:57 PM »
Should I just make an $11k contribution to our tIRA on January 2nd, then re-characterize in December when I know the exact amount needed?

This is what I do except I wait until taxes are done for the recharacterization (you have up until October 15th of the following year).

frugalnacho

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Re: When to fund my 2018 tIRA and Roth IRA?
« Reply #3 on: December 22, 2017, 05:58:28 PM »
Should I just make an $11k contribution to our tIRA on January 2nd, then re-characterize in December when I know the exact amount needed?

This is what I do except I wait until taxes are done for the recharacterization (you have up until October 15th of the following year).

Yes I won't do it in December, I'd just do it after I did my 2018 taxes

frugalnacho

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Re: When to fund my 2018 tIRA and Roth IRA?
« Reply #4 on: January 02, 2018, 11:37:19 AM »
I have a large IRA ($200k+) and my wife's is around $50k, both are a mix of vtsax and vtiax.  Would it be advantageous for us to create new accounts with this contribution?  I am buying the same investment whether it eventually converts to roth or stays in my IRA, so our overall net worth will be the same regardless, but it seems like if we have separate accounts and split between domestic and international (ie domestic in my new account, and international in the wife's new account) that we can shift a greater proportion into roth.

For example if we both open new tIRA and I put $5500 into VTSAX and my wife puts $5500 into VTIAX, and VTSAX does really well in 2018, then I can recharacterize my entire new tIRA into roth.  The actual balance recharacterized to roth will be higher than if we had recharacterized the lower performing asset, and will also be higher than if I had to recharacterized a pro rated amount from my main tIRA.