# The Money Mustache Community

## Learning, Sharing, and Teaching => Taxes => Topic started by: OneCoolCat on February 01, 2019, 06:56:25 PM

Title: Roth or Traditional IRA (
Post by: OneCoolCat on February 01, 2019, 06:56:25 PM
I put my contribution in 2018 into a Roth.  TurboTax says I'll see a \$660 increase in my refund if I put it into a traditional.  I think that means my Roth contribution is taxed at around 8.5%.  That seems pretty decent, right?  Would anyone convert to Traditional in this situation?
Title: Re: Roth or Traditional IRA (
Post by: MustacheAndaHalf on February 01, 2019, 08:24:18 PM
\$660 / 0.085 = \$7765, which exceeds the annual contribution limits for a Roth IRA.

The lowest tax brackets are 0% and 10%.  If your Roth contribution is being taxed at 10% or less, I'd keep it where it is.  I'm assuming it's very unlikely to see that tax bracket in retirement, or at least unlikely to see a better tax rate in the future.

What amount did you contribute to a Roth IRA for 2018?
Title: Re: Roth or Traditional IRA (
Post by: OneCoolCat on February 01, 2019, 08:34:14 PM
\$660 / 0.085 = \$7765, which exceeds the annual contribution limits for a Roth IRA.

The lowest tax brackets are 0% and 10%.  If your Roth contribution is being taxed at 10% or less, I'd keep it where it is.  I'm assuming it's very unlikely to see that tax bracket in retirement, or at least unlikely to see a better tax rate in the future.

What amount did you contribute to a Roth IRA for 2018?

Thanks!

My wife and I each contributed \$5,500.00.  The \$660 was a hypothetical if one of us just converted our Roth contribution to traditional.
Title: Re: Roth or Traditional IRA (
Post by: MDM on February 01, 2019, 09:29:25 PM
\$660 / 0.085 = \$7765, which exceeds the annual contribution limits for a Roth IRA.

The lowest tax brackets are 0% and 10%.  If your Roth contribution is being taxed at 10% or less, I'd keep it where it is.  I'm assuming it's very unlikely to see that tax bracket in retirement, or at least unlikely to see a better tax rate in the future.

What amount did you contribute to a Roth IRA for 2018?

Thanks!

My wife and I each contributed \$5,500.00.  The \$660 was a hypothetical if one of us just converted our Roth contribution to traditional.
That's a 12% marginal rate.  Given that, it's not difficult to envision scenarios in which traditional would be better, and scenarios in which Roth would work better, in the long run.  Depends on the rest of your finances and plans.  See https://www.bogleheads.org/wiki/Traditional_versus_Roth for more.