Author Topic: 2016 End of Year Contributions  (Read 1171 times)

COEE

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2016 End of Year Contributions
« on: December 26, 2016, 12:30:13 AM »
I've been looking at this year's retirement contributions and have been thinking about some ideas I've been having and would appreciate some feedback from those more knowledgeable. 

Pertinent Information: I have a 401k that I have not quite fully funded funded this year, and I don't plan to.  My wife does not have a 401k.  We will just barely be in the 25% tax bracket for 2016 if I've done my math right. Married Filing Jointly.  We plan to max out all of our contributions next year.

Simple Plan Based on our MAGI we will be able to contribute up to about $8k total into a tIRA.  I don't know that I can save all of this money before April 15th, but I do think we can get some money in, and be smart about it.  I'm thinking I should contribute to a tIRA so that we do fall into the 15% tax bracket.  If I put in $4000 this will probably put me close to the 15% tax bracket, and will save me $400 because I jumped from the 25% to 15% bracket. 

More Complex Plan I have been toying around with an idea of putting as much as 6 months (~$20k) of our 12 month emergency fund in TIPS mutual funds in a brokerage account.  The reason I bring this up is because I could put a portion of my emergency fund in a rIRA and have the TIPS taxes sheltered and still have access to the (contributed) funds in the event that we need the money.  The only downside I see is that I wouldn't have access to the gains of the TIPS without paying an early withdrawal penalty - which is really my goal in putting my emergency fund in TIPS.  Even though having access to the contributions certainly doesn't make it much worse than the funds sitting in my savings account making 1%.

So here's what I'm thinking - put about $4k in a tIRA before April 15th to get us solidly in the 15% tax bracket - saving us about $400.  Pull $7k out of our emergency fund and fill out the rest of our 2016 contributions in TIPS in rIRA's.

Does this make sense?  Am I off my rocker?  Am I missing something?  Better ideas?  Should I just plan to ignore all of the above work and hit it hard in 2017?


« Last Edit: December 26, 2016, 01:12:29 PM by COEE »

chasesfish

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Re: 2016 End of Year Contributions
« Reply #1 on: December 26, 2016, 11:49:45 AM »
I'm trying to follow this as best I can.

I think you should get as much as possible into the traditional IRAs between now and April 15th, even if you have to move some money around to take the full deduction in 2016.   Then do everything you can to maximize all options in 2017. 

COEE

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Re: 2016 End of Year Contributions
« Reply #2 on: December 26, 2016, 12:21:54 PM »
I'm trying to follow this as best I can.
  Thanks for the feedback - I'll try to edit my original post to make it more clear.  It is a bit complex - that's why I'm asking for some feedback / critique.

I think you should get as much as possible into the traditional IRAs between now and April 15th, even if you have to move some money around to take the full deduction in 2016.   Then do everything you can to maximize all options in 2017.

I guess what I'm saying is that I'm not sure I can max out all of my contributions at this point by April 15th.  Maybe - but it will be close.  I was thinking of doing some smart things - like contributing enough to get me to the 15% tax bracket - to save a little bit of money.  I think trying to max out our tIRA's may put me at risk of not being able to max out our contributions in 2017 due to the needed cash flow in case of an emergency.