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re: Am I over thinking this...Roth v. Traditional IRA
Posted on 9/6/18 at 8:21 am to HailToTheChiz
Posted on 9/6/18 at 8:21 am to HailToTheChiz
Either way be sure to max contributions for you and wife $11k.
Expecting a much lower bracket later and considering your current high bracket I'm not sure ROTH conversion is your best strategy unless it's do e later when you leave the high income job.
One note on your math, ROTH is not like investing $3685 instead of $5500. You'll have the full 5,500 invested. However, it will cost you about $8100 of income minus taxes to contribute that $5500. Sounds like a bad deal but remember that $5500 in ROTH will grow and never be taxed again while you'll eventually owe income tax on the full balance of the traditional IRA. Point is ROTH actually allows you to contribute more (in terms of pre tax dollars) and the eventual balance will be worth more since it will not be subject to income taxes upon withdrawals.
Expecting a much lower bracket later and considering your current high bracket I'm not sure ROTH conversion is your best strategy unless it's do e later when you leave the high income job.
One note on your math, ROTH is not like investing $3685 instead of $5500. You'll have the full 5,500 invested. However, it will cost you about $8100 of income minus taxes to contribute that $5500. Sounds like a bad deal but remember that $5500 in ROTH will grow and never be taxed again while you'll eventually owe income tax on the full balance of the traditional IRA. Point is ROTH actually allows you to contribute more (in terms of pre tax dollars) and the eventual balance will be worth more since it will not be subject to income taxes upon withdrawals.
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