Our ROTH choice dilemma

[old medic]

In trying to learn about ROTH, my head hurts...I'm mean I've got rubberbands smoking....
Im 58, retiring in Dec with a monthly pension, a 401K of about $150K and future SS. The Wife is 53, will have a full pension in 7 years, current 401K about $30K and adding about $1000 a month, and also SS at some point.
We have $30K sitting in a savings account gaining about nothing. No mortgage but restoring our home (another story).
What I'm thinking is open us both a ROTH with money from savings ($10-$14K) and max out our contributions each year we can, Mine would be limited to any part time worked. Can start pulling from my 401K late next year to cover the cost if needed.
Considering this as another nest egg that may end up in our grandsons lap if we dont need it... Tax free for him
Any opinions? Thanks

 

[SecondCor521]

Read up on spousal IRA contributions. Basically, if your wife earns enough at her job and your MFJ income is under the appropriate limits, you can both contribute the maximum to your Roth IRAs even if you don't have earned income. Basically MFJ folks can share earned income for Roth IRA contribution purposes.

Are the home restoration costs already covered somehow? If not, I'd probably use the $30K towards that first; no sense in being fancy and complicated if unnecessary.

 

[old medic]

MFJ yes... so thats great news to me... thought I had to work someplace... Know I can't add to my 401K even continuing at my same job part time. The Home is a DIY project, and basically our only CC debit balance at 0% interest. Its taking time, but getting there.

 

[SecondCor521]

If you want to Google it, I believe it's called the Kay Bailey Hutchison spousal IRA provision. Note that if you already have an existing IRA, it's OK to make spousal contributions to that IRA; there is no need to set up a second "spousal IRA".

 

[SevenUp]

Im 58, retiring in Dec with a monthly pension, a 401K of about $150K....
The Wife is 53, will have a full pension in 7 years, current 401K about $30K and adding about $1000 a month....

Depending on the size of those pensions compared with current salaries, you might be better off contributing to traditional IRAs while at least one of you is still working. And/or, for you this year and for your wife as long as she continues to work, contributing the full $25K/yr to each 401k.

Have you already done some calculations to estimate that Roth is better for you?

 

[old medic]

Have you already done some calculations to estimate that Roth is better for you?

From what I have figured is that by the time of DW retirement, the 2 ROTHs would have about 10K more value than the tIRA, and build tax free from there.

She can heavily pad her 401K and that would allow me to pull from my 401K and while staying in a lower tax bracket. Once she retires, losing the 401K contribution will move us to the 22% bracket...

 

[SevenUp]

From what I have figured is that by the time of DW retirement, the 2 ROTHs would have about 10K more value than the tIRA, and build tax free from there.

If that's true then yes, Roth will be better for you. How are you defining "value"?

 

[old medic]

If that's true then yes, Roth will be better for you. How are you defining "value"?

Used a couple different calculators and they came up with about the same numbers. Est growth value comparing ROTH to 401K. Its not that much a difference, But will be converting my 401 to ROTH at 12% now.