Getting back on track / where should I invest?

[Webzter]

Ok, two years ago investing was easy... dial up both 401k's to the limit and put all other money in a tax-friendly account. Roth's weren't an option and probably wouldn't have made sense even if we qualified. Those were different times.

We rolled those to traditional IRAs at the big V and have just north of $230k between both accounts.. both in the target retirement 2050 fund.

Now, one worker bee instead of two and no employer 401k. I'm 33, DW is 32. Salary is $75k and I'm a plain ol' w-2 guy. I think I can ease back in at saving 20% starting, well, Monday.

I'm on the fence on if I should contribute to a roth or traditional IRA until max... or skip both of those and just put everything in a taxable. To maintain my AA, I'll need to add some bonds and so I should at least be contributing to an IRA to buy those (I know there are tax-efficient bond funds floating around, but still....)... but bonds sure do seem like a boring fit for a roth when my taxes are (relatively) low. Maybe shoot the moon on an aggressive AA in a roth (I do assume, by the time I retire, roth funds still won't be directly taxed but will be siphoned somehow)

Help?

 

[growing_older]

I'm not sure I understand your options. It seems to me that you should be choosing whether to put the first $5000 into either a traditional IRA or a Roth. In the IRA you get the deduction, but in the Roth you get tax-free withdrawals. Either of these options seems to have advantages over taxable. Once you have filled up whichever you choose, then putting the rest into taxable.

 

[Webzter]

Yeah, I rambled a lot, I'm sorry!

I think those are my options (unless I'm missing something!). T-IRA, Roth, or taxable?

I'm guessing T-IRA won't make a big dent in income (gotta run the numbers to see if it keeps me out of a higher marginal area). So, Roth seems like the winner.

 

[chinaco]

Will your DW be going back to work?

The roth vs trad seems to be a tax bracket math problem... plus do you even qualify to use before tax money or the IRA in your situation?


IMO - If you cannot get income tax deferral on the IRA contributions.... a traditional IRA does not make much sense. The Roth would seem to be a better option.... unless I am missing something! Another consideration... Saving $5k of before tax money is not quite the same as saving $5k of after tax money. $5k of after tax money in effect enables one to save more (in effect.. at a 25% marginal tax rate... it is $6.6k if taxes were due)

I believe the Roth is generally a superior mechanism... but that is a generalization. It really depends on one's situation and tax brackets now and in the future.

 

[target2019]

$69K is the cutoff between 15% and 25% for married. I would go T-IRA and delay $1250 in fed taxes.

 

[Webzter]

Will your DW be going back to work?

The roth vs trad seems to be a tax bracket math problem... plus do you even qualify to use before tax money or the IRA in your situation?

DW might be at some point. Probably low-paying and part-time.

What would disqualify me from being able to use pre-tax to fund the IRA? I had assumed it'd be a non-issue since no other retirement choices are available.

I guess I should call Vanguard and get my money's worth

 

[Webzter]

$69K is the cutoff between 15% and 25% for married. I would go T-IRA and delay $1250 in fed taxes.

Still in the early years of a 30 yr mortgage so deductions should bury our AGI into the 15% area but I'll need to run the numbers.

All, Thanks for the ideas to mull over!

 

[Packman]

Seems to me that $10,000 into a Roth IRA this year is your best bet. If you can swing more than 10k per year, put the rest in a taxable account. If you plan to retire before age 59.5, you will want to get some funds into taxable savings. And make sure you have an adequate emergency fund in a liquid account.