Author Topic: Roth IRA VS Traditional IRA  (Read 1332 times)

scottyent

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Roth IRA VS Traditional IRA
« on: February 07, 2017, 03:44:17 PM »
Hey MMM forum!

First post here but avid reader of the blog. I have a investment dilemma that I don't know how to decide on, so I figured I'd appeal to more experienced minds!

Question: Should my wife start a Roth IRA or a Traditional IRA

Background info: I have a a Roth IRA and have for the last 5 years. We are in our mid 20's, and currently going to be in the 25% tax bracket this year. We own our own business though, so last year we were 15%, this year we should be 25%, and who knows from there on out.

I understand that a Roth IRA should be for if you believe you will be in a higher tax bracket when you retire, so optimistically I chose that. However, I came across the limit of contribution once you hit a higher income (184k joint filing), which in my mind reduces the optimism part of that equation.

Now my wife wants to start a retirement path for herself. If we are both in Roth IRA than we both have the limit imposed on us, but we both have the benefit of tax free growth.

However, I was thinking...what if she gets a traditional IRA to sort of mitigate the optimism of my Roth IRA, then down the road perhaps she can convert it to create a backdoor Roth IRA if that ever makes sense. We would have the added benefit of having her IRA to reduce to our taxes right now. That makes me wonder if doing it this way creates a wash though, since she'll be paying taxes upon withdrawal when I wouldn't.

I know this hinges on questions like - do you think you'll make more money in retirement - and unfortunately I have no idea. I'd like to that's for sure, and I intend to, but whether I will is obviously never a given.

Any thoughts and advice on the subject to help me parse this out would be very helpful!


RWD

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Re: Roth IRA VS Traditional IRA
« Reply #1 on: February 07, 2017, 03:54:28 PM »
If you've hit the income limit for contributing to a Roth IRA you may not be able to contribute to a traditional IRA either. Depends on your (plural) work retirement plan coverage:
https://www.irs.gov/retirement-plans/2017-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work
https://www.irs.gov/retirement-plans/2017-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-not-covered-by-a-retirement-plan-at-work

In general, a traditional IRA is more advantageous than a Roth IRA.
http://www.gocurrycracker.com/roth-sucks/

scottyent

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Re: Roth IRA VS Traditional IRA
« Reply #2 on: February 07, 2017, 04:27:28 PM »
Well shit, that leaves me SOL with my current Roth haha

Looks like creating a Traditional IRA is number 4 on that list on GoCurryCracker. Still better than last though!

I just stumbled upon GoCurryCracker recently with their all stocks recommendation. Made a lot of sense to me, happy to see they give good financial advice in other areas.

Thanks for the info!