That's very generous of you to set up an inheritance for your nieces and nephews, Cindy.
My wife and I are very fortunate to be ineligible for both types of IRA. Our current goals are to burn our mortgage and pay off all the PLUS Loans we accumulated for our four kids' undergraduate degrees before I retire in a couple three years! Their educations are already providing a great return on investment.
On Mon, Sep 21, 2015 at 11:06 AM, Cindy King cindy.kingde@gmail.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:
Jim, thanks for the additional info. You CAN convert - whether you do or not is your decision.
In my case, I wanted some funds in a Roth IRA as an inheritance for nieces and nephews. This way I don't have to start taking the funds at age 70.5 and they can roll the money to their own retirement or take it out. I'm concerned for future generations without pensions and this is a way to emphasize retirement planning.We did an analysis on this board a few years ago - showing you had more money in a traditional fund than in a Roth.I thought that the original poster thought a Roth was not an option at all, and wanted him to know it is an option.BTW, if you do want to convert to Roth, I wouldn't wait until the end of year to do it. You can do it immediately after putting the funds in a traditional IRA.If you have the funds to do both TSP and IRA, most advisors I know support doing both.
On Monday, September 21, 2015, JM Bud jmbud2@gmail.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:Cindy wrote, "Regardless of income, you can always put into a traditional and then roll-over to Roth." Unless I'm mistaken, the "always" part of that statement is not correct. If a married couple is fortunate enough to have a modified adjusted gross income (AGI) over $193,000, they can't contribute any amount into a Roth IRA. [Ref. 1]Married filing jointly couples with employer funded retirement plans can only take a deduction on traditional IRA contributions if their modified AGI was under $118,000. [Ref. 2] Even if Charles and his wife have adjusted AGI above that limit, it sounds like you are suggesting they contribute up to $5500 per year to an IRA anyway. Then at the end of every year they would convert that amount plus any growth into a Roth IRA and pay 28% income tax on that year's total. That means they would have to come up with at least $1540. out of pocket every year and be far from retirement. Some advisers don't think that make sense for most people. [Ref. 3, 4]Hope this helps.JimReferences:On Mon, Sep 21, 2015 at 6:50 AM, Cindy King cindy.kingde@gmail.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:What do you mean "not able to use Roth"?
Regardless of income, you can always put into a traditional and then roll-over to Roth. There are issues if you have a large existing Traditional, but it is possible to put funds into Roth.As long as funds are in a retirement account, you don't pay taxes on any growth.If income is too high, your IRA contribution is not deductible, but you still can and should contribute to an IRA.If you're talking about funding a taxable account outside of a retirement plan, are the non-taxable bonds exempt from both federal and state tax? Would you expect them to be hurt when interest rates are raised?I'm just not clear on your question. Please clarify. Hope my comments are helpful in some way.
On Monday, September 21, 2015, charleswsmith1@yahoo.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:Buy non taxable bonds next?
I am 12 step 2, wife 13 step 2. With our mandatory overtime I am afraid we will get close to the income cap if I buy too much stuff in a taxable brokerage account within 5ish years and not be able to use ROTH.
Just trying to not raise our tax rate since it's so high and we don't have many deduction besides just mortgage and some work related expenses.
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-- Cindy King
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-- Cindy King
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Posted by: JM Bud <jmbud2@gmail.com>
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