BrianOB wrote:(1) According to the BH wiki it looks like the Traditional IRA will be non-deductible due to the MAGI limits. The comparison table (for stocks) makes taxable investing look more favourable but we want to use it to hold exclusively Bonds (in which we are underweight). Is this a reasonable strategy?
It is a reasonable strategy and it was regularly suggested here a few years ago. However, there is some current thinking that using muni bonds (tax-exempt bonds) in your taxable account may be a better idea at the present time. Muni bonds are simply paying more than taxable bonds, even before taxes on the taxable bonds. This will not always be true, but it seems like a pretty good bet right now.
Another strategy is to use I Bonds in taxable, but you can only buy a limited amount per year.
(2) I didn't realise that anyone at any income level can convert a Traditional IRA to a Roth account now - should we? We don't plan to touch it before 59.5, plan to be retired by then and we also don't plan to leave anything behind (no heirs). We're also already in the top tax bracket so I don't see our tax bracket rising.
No, you should not convert at your present rate. There is no reason to pay 39.6% federal now when you could pay considerably less later if you do conversions when you are in a lower tax bracket. Or don't do conversions at all and simply pull from your traditional IRA/401k at a lower rate.
(3) Are these the same thing? If we convert it can we still contribute to it (post-tax) even though we exceed the income tax limits or is it just something you have to do every year? i.e. create a new TIRA, convert it to RIRA.
I'm not sure what this question means. Are what the same thing?
(4) If it's an entirely non-deductible Traditional IRA then are the withdrawals tax free, same as the Roth IRA?
Yes, but the only way it would be entirely non-deductible is if there are no earnings. The IRS considers all of a person's traditional IRAs to be one IRA. You don't get to have one that is non-deductible and another that is not. For example, your wife's rollover IRA is (presumably) all deductible. If that is 90% of her tIRA and she has another that is all non-deductible that makes up the other 10%, her ONE IRA is 90% untaxed and 10% taxed.
(5) In short - Is a non-deductible Traditional IRA a sensible thing to own in our position?
Don't know. And the answer might be different for you and for your spouse. You might be a good candidate for back door Roth, but she obviously is not.
If you are nearing retirement and if you foresee a few years when you will be in a low tax bracket (no pension, delaying SS, living mostly on return of already taxed money from a taxable account), that could give you some years to systematically convert tIRA to Roth IRA at a low tax rate.
Knowing more about your specific situation might be helpful. It would be good to have some Roth assets, but I would not be converting to Roth at your tax rate.