I have a 401k and recharacterized my IRA to Traditional last year...

[jeromedawg]

I didn't realize that there are restrictions on deducting contributions to the traditional if you already have a 401k company-sponsored plan though until just recently :(

So, is there any real benefit (besides the tax deductions I wanted but don't qualify for) to maintaining the IRA as Traditional, as opposed to a Roth, if I'm already participating in and planning to max out my 401k?

[jeromedawg]

Anyone have thoughts on this? Should I just go back to contributing to the Roth IRA instead?

[frugalnacho]

Huh? You can contribute to a 401k and a traditional IRA.  Max them both.

[jeromedawg]

Huh? You can contribute to a 401k and a traditional IRA.  Max them both.

I know I can and plan to. It's the way my IRA is characterized that I'm wondering about. Should I contribute to my Roth IRA or my Traditional IRA?

I recharacterized my Roth IRA contributions last year to Traditional because I thought I could leverage deducting it from taxes (but I didn't know that you cannot do this if you already participate in an employer-sponsored 401k and if you make over a certain amount). It seems, if I can't deduct it based on the fact that I am participating in a 401k and am above the max salary cap for it, I might as well contribute to my Roth IRA instead of the Traditional IRA

[frugalnacho]

Huh? You can contribute to a 401k and a traditional IRA.  Max them both.

I know I can and plan to. It's the way my IRA is characterized that I'm wondering about. Should I contribute to my Roth IRA or my Traditional IRA?

I recharacterized my Roth IRA contributions last year to Traditional because I thought I could leverage deducting it from taxes (but I didn't know that you cannot do this if you already participate in an employer-sponsored 401k and if you make over a certain amount). It seems, if I can't deduct it based on the fact that I am participating in a 401k and am above the max salary cap for it, I might as well contribute to my Roth IRA instead of the Traditional IRA

You are filing single and make over $80k/yr?

[jeromedawg]

Filing joint married (dual incomes) and our modified AGI was above $116k

[frugalnacho]

Ah gotcha.  So MFJ with MAGI above 118k (for 2015) means you cannot deduct tIRA at all (if you participate in 401k), but you can contribute to a roth as long as your magi is below 181k.   Definitely sounds like you should contribute the max to roth and forget about the tIRA in your situation.  Hopefully someone more knowledgeable than me can chime in.

[jeromedawg]

Ah gotcha.  So MFJ with MAGI above 118k (for 2015) means you cannot deduct tIRA at all (if you participate in 401k), but you can contribute to a roth as long as your magi is below 181k.   Definitely sounds like you should contribute the max to roth and forget about the tIRA in your situation.  Hopefully someone more knowledgeable than me can chime in.

Yep, that's what it sounds like to me. Contributing to the tIRA seems pointless moving forward. The thing that sucks is that I went through all this trouble to recharacterize my contribution from last year and didn't realize it wouldn't work out :( Now I know so lesson learned. I suppose I can always roll it over to a Roth IRA anyway... hopefully there's no tax implications of doing that either (anyone know in my case?)

[gluskap]

Ah gotcha.  So MFJ with MAGI above 118k (for 2015) means you cannot deduct tIRA at all (if you participate in 401k), but you can contribute to a roth as long as your magi is below 181k.   Definitely sounds like you should contribute the max to roth and forget about the tIRA in your situation.  Hopefully someone more knowledgeable than me can chime in.

Yep, that's what it sounds like to me. Contributing to the tIRA seems pointless moving forward. The thing that sucks is that I went through all this trouble to recharacterize my contribution from last year and didn't realize it wouldn't work out :( Now I know so lesson learned. I suppose I can always roll it over to a Roth IRA anyway... hopefully there's no tax implications of doing that either (anyone know in my case?)

There's no tax implication if all of your tIRA is with contributions after tax or nondeductible contributions.  If you have a rollover tIRA from an old 401k or older contributions that were deducted then you would have to pay tax on the conversion.  I feel you on the pain to recharacterize as I had to do it this year but luckily I did it early and there wasn't much earnings (actually they were negative, lol).

[Gone Fishing]

Call your provider, you may be able to switch it back to the Roth. 

Per the IRS:

What is the deadline to recharacterize a Roth rollover or conversion?

You generally can recharacterize your rollover or conversion by October 15 of the following year, regardless of whether you requested an extension to file your tax return. For example, for your conversion to a Roth IRA in 2013, you have until October 15, 2014, to recharacterize. This deadline applies even if:

•you did not request an extension to file your 2013 tax return, and
•you file your return on or before April 15, 2014.

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[jeromedawg]

Call your provider, you may be able to switch it back to the Roth. 

Per the IRS:

What is the deadline to recharacterize a Roth rollover or conversion?

You generally can recharacterize your rollover or conversion by October 15 of the following year, regardless of whether you requested an extension to file your tax return. For example, for your conversion to a Roth IRA in 2013, you have until October 15, 2014, to recharacterize. This deadline applies even if:

•you did not request an extension to file your 2013 tax return, and
•you file your return on or before April 15, 2014.

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So the dumb thing I did last year (in Nov or Dec) was I recharacterized all my Roth contributions for 2014 to Traditional...I think you can only recharacterize once per year too, so I think I'm SOL.

But it seems like I could just go ahead and convert these traditional IRAs to roth IRAs this year anyway and not get hit with taxes (since I couldn't deduct anything anyway). I'm just afraid I'm missing or not considering something else...