I am 30 and DW is 28. Our combined income is 125k, and we have about 150k saved for retirement and no debt other than a 110k mortgage. Because both our employers generously contribute tax deferred retirement money, and because we expect tax rates to be higher when we retire, our own contributions have been focused on Roth accounts. We contribute the max to each of our Vanguard Roth IRAs, and anything we contribute beyond that goes to my Roth 403(b) at work (no match).
I just realized though that I may have missed an opportunity for better tax treatment of my savings. Our plan has always been to begin having children at this age (DW is now pregnant with our first). So DW will be starting her 7ish year gap from working in early 2014. This will mean that our income will decrease to about 65k, putting us in the 15% bracket instead of the 25% and probably significantly decreasing the amount that we will be able to save for retirement.
It looks like we could have been better off if we had made some of our contributions to a traditional IRA and had gotten the 25% deduction (we already itemize). Then we could bank the tax savings and use it to do a Roth conversion once we are in the 15% bracket. Is this true or is there something I'm missing? I guess if we had a large amount of earnings then 15% of the new value might be close to 25% of the original contribution, but that seems unlikely at least for the most recent contribution. Anything I can do now to take advantage of our tax bracket lowering next year?
I just realized though that I may have missed an opportunity for better tax treatment of my savings. Our plan has always been to begin having children at this age (DW is now pregnant with our first). So DW will be starting her 7ish year gap from working in early 2014. This will mean that our income will decrease to about 65k, putting us in the 15% bracket instead of the 25% and probably significantly decreasing the amount that we will be able to save for retirement.
It looks like we could have been better off if we had made some of our contributions to a traditional IRA and had gotten the 25% deduction (we already itemize). Then we could bank the tax savings and use it to do a Roth conversion once we are in the 15% bracket. Is this true or is there something I'm missing? I guess if we had a large amount of earnings then 15% of the new value might be close to 25% of the original contribution, but that seems unlikely at least for the most recent contribution. Anything I can do now to take advantage of our tax bracket lowering next year?