Author Topic: Backdoor Roth (taxes) or fund Roth?  (Read 1686 times)

La Bibliotecaria Feroz

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Backdoor Roth (taxes) or fund Roth?
« on: September 25, 2014, 01:32:18 PM »
My husband and I both have orphaned accounts; his is a 403(b) with about $30K and mine is a traditional rollover IRA with about $17K.  I'd like to roll them over into a Roth in hopes of eventually retiring early.

Currently, though, we don't have much cash. About $7K now; hopefully at least $10K by April 15 and maybe more if I get a job (I'm looking). Being about to fund Roths for both of us and still have enough left over to pay taxes on a Roth conversion seems like an extremely remote possibility, so my question is, which should we prioritize?

Some facts about our situation:
1. We are currently in the 15% tax bracket, but since I'm looking for a job, this is probably our last year there.
2. We really want to buy a house in the next year or two.

Any advice what we should do if we don't have enough $$ to do everything?

Gone Fishing

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Re: Backdoor Roth (taxes) or fund Roth?
« Reply #1 on: September 25, 2014, 01:48:32 PM »
If you are planning to retire early, do not roll them into Roths.  Wait until you retire to roll them over, you will almost certainly be in a lower bracket at that point, maybe even 0%.  See a sample early retiree 0% tax return here:

Also consider using Traditional accounts for all future contributions.

This is how you get your money out without penalties/taxes: