I’m maxing out my 401k and have a 529 plan for the kids. I’m looking at opening an IRA and fully fund both 2022 and 2023 before the tax deadline. Would it make sense to do a tradition and leave it and pay tax later or do a back door Roth. (My income level is more than the Roth IRA will allow). Wont my tax bracket at retirement be lower since I’m retired? Why do a Roth now?

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AutoModerator t1_jef0v1m wrote on March 31, 2023 at 3:16 PM

#2,533,749

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nkyguy1988 t1_jef1p7i wrote on March 31, 2023 at 3:21 PM

#2,534,048

Backdoor Roth is the way.

Rave-Unicorn-Votive t1_jef2qdx wrote on March 31, 2023 at 3:28 PM

#2,534,423

If you make too much for a direct Roth contribution then you probably make too much to deduct a traditional contribution so you'll be paying tax now regardless.

If you have no existing tIRA balances, just do a backdoor. The traditional vs Roth, now vs. later tax bracket analysis is more geared toward 401ks. Given the low contribution limit and the low income threshold/phaseout of IRAs, it's usually better to just go straight to a rIRA.

rnelsonee t1_jef4ub3 wrote on March 31, 2023 at 3:42 PM

#2,535,115

Since you're covered by a retirement plant at work, and make too much for Roth IRA, then, unless you're Married Filing Separate where the Roth limit is $10k, then you must make too much to deduct traditionally IRA contributons.

So among trad IRA, Roth IRA, and normal brokerage, you're paying income tax up front regardless. But Roth IRA means no income tax on withdrawals, unlike the trad IRA (tax on earnings) and normal brokerage (capital gains tax on gains). So Roth is your best bet here.

huntwithdad OP t1_jefbt7i wrote on March 31, 2023 at 4:27 PM

#2,537,304

Replying to Rave-Unicorn-Votive (#2,534,423)

Makes sense thanks for the reply. Any tips on where is best todo the back door Roth? Was thinking fidelity since there name is brought up here a lot.

huntwithdad OP t1_jefbwj8 wrote on March 31, 2023 at 4:27 PM

#2,537,330

Replying to nkyguy1988 (#2,534,048)

That seems to be the consensus here lol. Any recommendations on where best to do the back door Roth?

huntwithdad OP t1_jefc7jl wrote on March 31, 2023 at 4:29 PM

#2,537,426

Replying to rnelsonee (#2,535,115)

Thanks and thanks for the link too! Looking to go back door than. Looking at fidelity and recommendations if you have an option on where to go to get this done.

nkyguy1988 t1_jefcx5o wrote on March 31, 2023 at 4:34 PM

#2,537,643

Replying to huntwithdad (#2,537,330)

Fidelity, schwab, or Vanguard.

Rave-Unicorn-Votive t1_jefd5h7 wrote on March 31, 2023 at 4:36 PM

#2,537,735

Replying to huntwithdad (#2,537,304)

Fidelity and Vanguard are functionally equivalent. If you don't have any existing accounts that would make consolidating at one brokerage more convenient you can literally flip a coin.

Schwab is also in the same tier but I'm trying to preempt your follow up post asking "Schwab says I can make a 2024 contribution…can I?" (persistent website bug, gets asked here about once a week)

huntwithdad OP t1_jeg0dqc wrote on March 31, 2023 at 7:08 PM

#2,544,959

Replying to Rave-Unicorn-Votive (#2,537,735)

Thanks that would be cool though if you could!

huntwithdad OP t1_jeg0fkn wrote on March 31, 2023 at 7:08 PM

#2,544,969

Replying to nkyguy1988 (#2,537,643)

Thanks I’ll check them out!