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Setup IRA for wife? (tax benefit question)
Old 04-12-2017, 10:10 AM   #1
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Setup IRA for wife? (tax benefit question)

Wife and I got married last year and are finalizing our taxes right now.

I've got a Roth IRA but she does not have an IRA or Roth. I'm 32 she's 29.

We can't do an HSA after researching our health plan further. The question is, should we set her up with an IRA this week or don't bother?

If we contribute the maximum amount, the amount owed with your tax return would be $452 (down from $1,312).
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Old 04-12-2017, 10:14 AM   #2
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The reason to do a traditional IRA is to defer taxes until you are in a lower tax bracket, after retirement. Will you probably be in a lower tax bracket when you retire?

I've come to appreciate Roths, as my tax bracket in retirement, post RMDs, will be as high as working.
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Old 04-12-2017, 10:35 AM   #3
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I am not sure what tax bracket I'll be in at retirement. Making about 200k now. Hopefully making 500k soon
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Old 04-12-2017, 10:52 AM   #4
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Obviously you are too young to predict your tax bracket in retirement but odds are you won't have $500k/yr in today's dollars in retirement.

It is hard to predict whether a traditional IRA will be tax deductible with $500k+ taxable future earnings.

Personally I would do a traditional IRA asap.
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Old 04-12-2017, 11:19 AM   #5
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Quote:
Originally Posted by dsp0725 View Post
If we contribute the maximum amount, the amount owed with your tax return would be $452 (down from $1,312).
With a $200k income, you must have a lot of deductions to get your marginal tax rate down to ~ 15% ( (1312-542)/5500 -- this assumes you can contribute $5,500). 15% is pretty low, your tax savings this year are minimal, so a Roth IRA might be a good choice.

But your stated $200k-$500k income level is likely much higher than your retirement income will be. So taking the tax deduction now in a tIRA might be a good choice.

But, you've also bested my Spaniard...well, nevermind.

I'd probably take the Roth given the minimal impact on your finances this year. 2nd choice would be to take the tIRA. 3rd choice would be to take a Mediterranean cruise -- after all you can easily afford it once that $500k income kicks in.
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Old 04-12-2017, 12:18 PM   #6
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If you had same income last, don't think you'll get a TIRA deduction...........or be eligible for Roth contribution.
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Old 04-12-2017, 12:24 PM   #7
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If you had same income last, don't think you'll get a TIRA deduction...........or be eligible for Roth contribution.
Back door ROTH
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