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Our combined household income is going to hit close to $190,000 this year. Our mortgage is paid off. We are 45 and 49 yrs. old with 800 k total in our individual retirement plans which are 403bs. We contribute the max, currently $17,500 per year into these plan. DH puts his in tax-deferred and I put mine into Roth. Would you all keep putting this much into Roth and paying income tax on that $17,500 or take the bet that income taxes are going to stay the same and we'll be paying less in income tax in 20 years when we take it out?
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What sort of income do you expect to have in retirement? -
Income for retirement will be from these 403b accounts and social security. At this point, I don't know how much will be in those accounts.Comment
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So, likely much less than 190k per year?
I think it is good to have money in tax-deferred, tax-free, and taxable.
Depending upon your deductions, it looks like your marginal bracket is either 25 or 28 for federal, and you possibly pay state income tax too. So, you are passing up a substantial tax break now.
Do you currently have any money sitting in traditional, SEP, or Simple IRAs? If not, you are a great candidate to make non-deductible contributions to a traditional IRA, then immediately convert to a Roth IRA. You could choose the tax deferred 403b for both of you, then put 11k into Roth IRAs.
Later on, you could live off of your taxable account while converting large chunks of tax-deferred to Roth, planning the amounts to stay in the 15% bracket. Effectively avoiding 25 now while paying 15 later.Comment
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We have not been contributing to , and do not have, any IRAs.Comment
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I imagine you and dh are saving quite a bit in cash and/or in taxable investment accounts? Fund those Roth IRAs, regardless of what you decide to do about your 403b contributions.
The income limit to make direct contributions to Roth IRAs for 2014 is 191k. If your taxable income is higher than that, you can still do the "backdoor" method. Since you don't have deductible contributions in any other IRAs, there will be no tax on your conversions.
No reason not to.
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Yes, we are saving cash for upcoming college expenses, some badly needed home improvements, and a newer car. But, besides the 35k we are putting into the 403b accounts, we can definitely afford to put an additional 11k into an IRA and want to do so. Thanks so much for the advice! After your replies, it seems so obvious this is the best path but it was off my radar because we previously could not have saved that additional 11k because of lower salaries , etc!
Again, Thanks!Comment
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