Author Topic: Should I Change My IRA?  (Read 1474 times)

TrumpetS3

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Should I Change My IRA?
« on: May 15, 2016, 04:35:16 PM »
Hi Folks,

So in my quest to early FI, it was suggested here in a prior post and in many other blogs I've read, that it is common place for those working towards early FI use a method called the Roth IRA Conversion Ladder to enable them to access their tax sheltered monies prior to the age 59.5. This sounds exactly like something I would need to do since my largest fund is my 401k. The issue I have however, is when originally setting up my 3 fund diversified portfolio I had not even thought for one second that early FI was possible for me. I therefore opted for the Vanguard Roth IRA which I've contributed to in full for 2015 & 2016 as it seemed the best option for my situation at that time.

Since then I have made some big changes in my savings strategy and am looking to become FI in around 11 years. However, from what I'm reading, the recommended method for using the conversion ladder involves funding a Traditional IRA during the growth phase. I don't have a traditional, only a Roth. So these are my questions:

Can I still access this money in my Roth in the same tax efficient manner?
Should I stop funding the Roth and open a transitional IRA for 2017 and begin funding that?
Can I convert my Roth to a Traditional and then do the conversion as per what is recommended?

Thanks in advance!

forummm

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Re: Should I Change My IRA?
« Reply #1 on: May 15, 2016, 06:25:46 PM »
http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

Hi Folks,
Can I still access this money in my Roth in the same tax efficient manner?
Should I stop funding the Roth and open a transitional IRA for 2017 and begin funding that?
Can I convert my Roth to a Traditional and then do the conversion as per what is recommended?

I only have a Roth too. You can withdraw contributions from it at any time. We make too much money to get the traditional IRA deduction so we just do Roth contributions. Don't convert your Roth to a traditional. You're just fine. Going forward, if you qualify for the traditional IRA deduction, then it might be better to open a TIRA and contribute to that. What's your marginal tax bracket?

TrumpetS3

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Re: Should I Change My IRA?
« Reply #2 on: May 15, 2016, 07:29:01 PM »
Forummm, thanks for the link and input! I've been in the past 28% bracket, but since having a daughter this year and getting married will be in the 25% for the remainder of my working life.

MDM

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Re: Should I Change My IRA?
« Reply #3 on: May 16, 2016, 02:01:30 AM »
I've been in the past 28% bracket, but since having a daughter this year and getting married will be in the 25% for the remainder of my working life.

28% bracket and using a 401k means you aren't eligible for a traditional IRA.

The 25% bracket is too broad to make such a categorical statement.  See www.irs.gov/Retirement-Plans/IRA-Deduction-Limits.