Author Topic: Roth contribution vs. Rental debt paydown  (Read 312 times)


  • Bristles
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Roth contribution vs. Rental debt paydown
« on: March 19, 2019, 11:15:56 AM »
Through some changes in income (high rental property expenses that I chose to make in 2018 and will again in 2019, unsure afterwards) and the tax law, we find ourselves in the 12% Federal tax bracket for 2018. Upon seeing this, I was thinking Roth contribution instead of our usual tIRA. But since I would now be working with post-tax dollars, I am wondering if using those funds would be more effective paying down debt on our rental properties instead.

Roth IRA: Part of a 90/10 allocation. This is a 2018 tax year contribution to be made.
Debt: $60k on a LOC at 6% adjustable and $77k ($31k + $46k) on commercial loans at 6.25% fixed for 5 years (just renewed and reset interest rate in Feb)

The commercial loans are a higher rate but since paying down the LOC frees up the credit line to be able to purchase another property when/if, it would take a lot of convincing to get me to pay those off before the LOC.

This bucket of money was set aside specifically for 2018 IRA contributions once we found out where in the phaseout we would land. We max 401k, HSAs and my wife has a pension plus we invested in a taxable account in 2018 so we are contributing to our investments outside of this bucket. We also pay extra on the LOC as rents come in.

6% is a great guaranteed return to get, but I'm having FOMO on losing our 2018 IRA contribution amount permanently. Especially since I've been planning to put this into tIRAs. This came at me from nowhere once we saw our taxes. Looking for some opinions and viewpoints. Will I be kicking myself in the future if I don't utilize 2018's contributions?