Friend of mine tells me he makes after tax contributions for he and his wife every year. From previous jobs they rolled over some pre tax IRA money leaving them with 2 accounts each (pre and post tax IRAs). They make too much money to contribute directly to a ROTH. Question is, what are tips on the optimal tax strategy for them at this point in time regarding the IRAs? I see a few paths, maybe there are more:
1) recharacterize all IRAs as Roths, do backdoor Roths every working year afterwards
2) leave and continue contributing after tax money in IRAs
3) leave and forget the IRA for now and put money in a regular investment account knowing they can potentially take advantage of 0% capital gains during retirement
4) move the pretax account back into a 401K (the pretax is held in a separate IRA from post tax)
rough assumptions:
-they can stay at/live on the tip of the 15% tax bracket during retirement
-they are at the 28% federal tax bracket now and live in a state with ~5% inc tax
-they have 75K each of pre tax, 50K each of post tax IRA contributions, and 25K each of post tax IRA gains for a total of 300K in their IRAs (this doesn't count 401K etc etc)
-they plan to retire in 10 years
-let me know if you need more assumptions
