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Roth vs Traditional IRA
Old 10-04-2015, 07:48 PM   #1
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Roth vs Traditional IRA

We currently make 140k, my wife will start working in 24 months, we should be at 180-200k (I would be working a few less hrs once she starts working).

I was hoping to do a traditional deductible IRA due to my tax bracket. If I do regular deductible IRA can I switch it and pay taxes at the end of the year. My problem is that when I go to Vanguard Account it asks to choose between roth or regular IRA before opening act, and I am not sure how permanent this is.
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Old 10-04-2015, 08:09 PM   #2
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You can't do a deductible IRA at your income level unless I'm missing something. You're above the income allowance to deduct IRA contributions. Taxable income maximum for deductible IRA contributions is $118,000 if MFJ. There are other caveats, but Roth is the answer, as it almost always is.
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Old 10-04-2015, 08:13 PM   #3
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Well since my job does not offer a 401k limits go up to 180...close to that.
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Old 10-04-2015, 08:17 PM   #4
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You're talking about a recharacterization of contributions I think. When you recharacterize, the account doesn't change from a Roth into a traditional IRA (tIRA to Roth). It's a transfer from a Roth to a tIRA, a new tIRA account if you don't already have one. So the contribution can be switched, but the accounts themselves are permanent.

You might consider just contributing just before April 15 next year, when you know what you want to do for sure.
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Old 10-04-2015, 09:24 PM   #5
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Why don't you call VG........it seems highly unlikely that the choice would be permanent but it would be good to have VG confirm that.
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Old 10-04-2015, 09:39 PM   #6
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Originally Posted by martinitosnl View Post
Well since my job does not offer a 401k limits go up to 180...close to that.
Limit applies only if you are not covered by any type of retirement plan at work, not just not covered by 401k
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Old 10-04-2015, 10:01 PM   #7
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thanks, i will call VG this wk.
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Old 10-05-2015, 07:30 PM   #8
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Quote:
Originally Posted by martinitosnl View Post
Well since my job does not offer a 401k limits go up to 180...close to that.
Well, you didn't mention THAT. No retirement plan of any kind? Your W-2 says nothing about a retirement plan?

If that contribution is going to keep you out of a higher tax bracket, maybe do a traditional. Otherwise, Roth. At your (our) age, I'd almost always Roth.
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Old 10-06-2015, 08:13 PM   #9
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Quote:
Originally Posted by martinitosnl View Post
We currently make 140k, my wife will start working in 24 months, we should be at 180-200k (I would be working a few less hrs once she starts working).

I was hoping to do a traditional deductible IRA due to my tax bracket. If I do regular deductible IRA can I switch it and pay taxes at the end of the year. My problem is that when I go to Vanguard Account it asks to choose between roth or regular IRA before opening act, and I am not sure how permanent this is.
As with any custodian, they aren't responsible for paying taxes on your IRA. They do keep track of if it is a roth or traditional account, but you are responsible for keeping track of your basis in both (including deductible/non-deductible contributions). With that said, taxes are "paid" at 4/15 of the following year, how you choose to manipulate withholding is up to you.

You also have until 4/15 of the following year to contribute to an IRA. Recharacterizations (and "undoing") can be done up to 10/15 of the following year if filing for an extension.

So, it isn't really that permanent. I'd go with what you think you will most likely end up with to save on paperwork....
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