That's a fine plan!A traditional IRA (Spousal) will help reduce this years tax liability as our earnings will be lower in retirement and we will move to an income tax-free State (current state is around 7.5%).
The next step is to create a Spousal IRA depositing the max ($7K for over 50yo) and then roll over the old retirement plan into it.
Creating Spousal IRA - non ROTH - Need advice
- Thread starter Camping
- Start date
Update:
First I want to thank all of you who helped me sort this out.
We started an IRA [Spousal] at our credit union with a CD for $7K (55yo, so catch up) at 3% (37months).
After just completing our taxes, we have reduced our tax liability to the Fed, State & County of an amount of $2,176.
The State amount came to $637 in reduced tax liability, and because we expect to move to an income tax free state in retirement, that $637 is a real savings and represents 9.1%. (I understand this does not take into account of future fed income tax rates that may be higher than today's rates.)
Additionally, because we owed taxes on both Fed and State/County, the IRA contribution reduced the penalty interest fee on the State return. For the Fed, if we hadn't made the IRA contribution, the amount we would have owed (underpayment) would have been above the 10% threshold (10% or more of the total tax liability), thus incurring a penalty from the Fed.
Thank you
First I want to thank all of you who helped me sort this out.
We started an IRA [Spousal] at our credit union with a CD for $7K (55yo, so catch up) at 3% (37months).
After just completing our taxes, we have reduced our tax liability to the Fed, State & County of an amount of $2,176.
The State amount came to $637 in reduced tax liability, and because we expect to move to an income tax free state in retirement, that $637 is a real savings and represents 9.1%. (I understand this does not take into account of future fed income tax rates that may be higher than today's rates.)
Additionally, because we owed taxes on both Fed and State/County, the IRA contribution reduced the penalty interest fee on the State return. For the Fed, if we hadn't made the IRA contribution, the amount we would have owed (underpayment) would have been above the 10% threshold (10% or more of the total tax liability), thus incurring a penalty from the Fed.
Thank you
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Sounds like a winnah to me!
