NOLA wrote:Total household income:$125,000 (up from $110,000 in 2012)
Debt: Mortgage $320,000 @3.25% w/$150,000 in Equity (14 years left)
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, 6% State?
State of Residence: Louisiana
$125,000 gross income
- $3,500 pre-tax health, dental, and disability insurance premiums withheld from your pay (guess)
- $20,500 401k contributions, maxing hers and keeping his at $3,000
- $7,800 two personal exemptions
- $18,200 itemized deductions (guess based on that mortgage)
$75,000 taxable income
This taxable income puts you in the 28% federal bracket next year (25% if the current rates are extended). I'd guess your LA tax is 4%, but I'm not a LA taxpayer. 4% deducted against federal tax means 3% effective, so your total marginal rate is 31%. If you don't contribute this much to your 401k's, then your state rate will be 6%, or about 4.5% effective after deducting, so your total marginal rate will be 32.5%.
At these tax rates, it takes more than $16,000 of gross income to make two $5,500 Roth IRA contributions (on which you pay $5,000 of tax). Instead, use that $16,000 of gross income to increase her 401k contribution by $14,000. That leaves another $2,000 of gross income. You might use that to make a $2,000 deductible TIRA contribution -- your AGI puts you about halfway into the eligibility phaseout, so you may be able to contribute $2,000 or $3,000 each, depending on your actual numbers vs. my illustrative stack above.