ROTH/Traditional or Both
I got a surprise when I did my Taxes this year as it turns out I can contribute to a Traditional IRA and get the tax break.
Details- I work for the State and have a pension fund which they take 4% out of my paychecks for. I can retire with full benefits of 70% of my final average salary in 6 years.
I have a deferred compensation plan (gov't 401k) with no match that currently has about $10k in it.
I had planned to open up a ROTH IRA this year but found out that I can contribute to a Traditional up to the difference between the $4000 max and the amount going into my pension. Right now $1640 a year goes to my pension so I could put $2360 into a traditional IRA and it would be deductible.
My pension will be taxed by the Feds but not the State when I get it.
My Deferred Comp. will be taxed by both.
Does it make more sense to put my entire $4000 in a ROTH so I will have some untaxed earnings in retirement? I plan on leaving the State in 6 years (at 52 years old) and working my side business during retirement. I currently live off less than my pension will be.
Any opinions?
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