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Spirit of Dunson
Columbia Fan
Member since Mar 2007
22112 posts
Online

Contribute to an IRA or not

My wife and I file our taxes jointly, and our AGI is at a point where we cannot contribute to a Roth IRA. We are also beyond the limit where we can qualify for traditional IRA tax deductions.
However, there is no AGI limit on traditional IRA contributions.

So, should we still contribute to a traditional IRA even if we can't receive any tax benefit for doing so? Is there any benefit to this situation?


Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
59142 posts

re: Contribute to an IRA or not
quote:

Is there any benefit to this situation?


Tax deferred growth. That's kind of a big deal.


LSU0358
LSU Fan
Member since Jan 2005
5691 posts

re: Contribute to an IRA or not
Max it out as much as you can. Your profits are not taxed until you pull the money out.


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Spirit of Dunson
Columbia Fan
Member since Mar 2007
22112 posts
Online

re: Contribute to an IRA or not
quote:

ax deferred growth.
Even if my effective tax rate is going up? Or is the idea that you only withdraw when you are done working and your AGI is nill?
What if I never quit working?


TheDiesel
LSU Fan
Houston via Baton Rouge
Member since Feb 2010
2509 posts

re: Contribute to an IRA or not
Do you have a company sponsored 401(k)?


Spirit of Dunson
Columbia Fan
Member since Mar 2007
22112 posts
Online

re: Contribute to an IRA or not
quote:

Do you have a company sponsored 401(k)?
yup.


TheDiesel
LSU Fan
Houston via Baton Rouge
Member since Feb 2010
2509 posts

re: Contribute to an IRA or not
Doesn't that count towards your IRA maximum?


Spirit of Dunson
Columbia Fan
Member since Mar 2007
22112 posts
Online

re: Contribute to an IRA or not
quote:

Doesn't that count towards your IRA maximum?
nope. it does change your phase out amount for tax deductions, but has no effect on the contribution limits.


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Volvagia
LSU Fan
Baton Rouge
Member since Mar 2006
41850 posts

re: Contribute to an IRA or not
If you plan on working for a long while IRA contributions are still your goal.

If I were in your shoes though, I would consider starting to throw money in tax efficient holdings in a taxable account in order to open the door to retire early


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tirebiter
LSU Fan
ATL
Member since Oct 2006
5359 posts

re: Contribute to an IRA or not
Contribute to a money market in a nondeductible TIRA, then convert to Roth IRA with no taxes owed and tax free withdrawals down the road = $$$$$$$.


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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
59142 posts

re: Contribute to an IRA or not
quote:

Even if my effective tax rate is going up? Or is the idea that you only withdraw when you are done working and your AGI is nill?


Yeah. The theory is that you are in a lower bracket once you retire.

quote:

What if I never quit working?


Then stop putting into a retirement account. No need.


Spirit of Dunson
Columbia Fan
Member since Mar 2007
22112 posts
Online

re: Contribute to an IRA or not
quote:

Then stop putting into a retirement account. No need.
genius.

THANKS!


Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
59142 posts

re: Contribute to an IRA or not
I get paid big bucks for this. That one, my friend, was on the house.


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VABuckeye
Ohio State Fan
Oak Hill, VA
Member since Dec 2007
13798 posts

re: Contribute to an IRA or not
quote:

My wife and I file our taxes jointly, and our AGI is at a point where we cannot contribute to a Roth IRA. We are also beyond the limit where we can qualify for traditional IRA tax deductions.


Same here but I still put money in the IRA for another pile of money in the future.

As an aside I told my wife that I want to take home a grand a month more and I have to pay myself about $2k more gross to take home $1k. Sucks.


Spirit of Dunson
Columbia Fan
Member since Mar 2007
22112 posts
Online

re: Contribute to an IRA or not
quote:

I still put money in the IRA for another pile of money in the future.
I'll probably do the same just for shits and grins.


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acgeaux129
USA Fan
We are BR
Member since Sep 2007
15011 posts

re: Contribute to an IRA or not
quote:

The theory is that you are in a lower bracket once you retire.



Why is that? Aren't withdrawals treated as income? And what about capital gains?


foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
32180 posts

re: Contribute to an IRA or not
quote:

What if I never quit working?


Set up an educational trust for the kids.

Or you can send me the money, I'll spend it on quality hookers and blow and will send you pics.


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Volvagia
LSU Fan
Baton Rouge
Member since Mar 2006
41850 posts

re: Contribute to an IRA or not
quote:

Why is that? Aren't withdrawals treated as income?



Yes but most people dont pull as much as they made in a given year.


quote:

And what about capital gains?


Does not apply to tax advantaged accounts.


acgeaux129
USA Fan
We are BR
Member since Sep 2007
15011 posts

re: Contribute to an IRA or not
quote:

Does not apply to tax advantaged accounts.


Didn't realize for Traditional Roth. Thanks.


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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
121884 posts

re: Contribute to an IRA or not
quote:

Even if my effective tax rate is going up?

Yes. Even though you don't receive the deduction you still don't get taxed on the growth via a capital gains tax. It still acts as a tax shelter.


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