First Post - Overview + Roth v. Traditional?

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First Post - Overview + Roth v. Traditional?

Postby boknows » Tue Jan 29, 2013 9:03 am

Long time lurker of this site, and long time user of other PF sites. Figured I'd give a post and take any constructive criticism.

Me (31) and my wife (31) currently gross ~$150k/yr (with her working part-time, as she is home most of the week caring for our 9mo old son). Only debt is the mortgage.

Investment Balances (roughly)
Combined 401k's - $200k
Combined Roth IRA's - $65k
Combined Taxable Accounts - $35k
Combined Cash - $20k
Home equity - ~$100k ($280k mortgage @3.25% on ~$380k home)

Annual Investment "Strategy"
Max out both 401k's ($17500 each)
Max out both Roth IRA's ($5500 each)
Deposit of $1500/mo into Taxable account
Deposit $5000/yr into a 529 plan.

Mint.com tells me that our rough yearly expenses are 50-60k with the mortgage (35-45k without). Pretty much all of our investments are a 80/20 mix of simple total market stock/bond funds (Vanguard), including our Taxable accounts. Our intermediate goal is to save up enough money in the Taxable accounts to potentially purchase another home (I want to have 20% ready, in case we either decide to rent the old townhome or simply cannot sell right away). We accept the risk involved in "saving" our money in such an account for a medium-term goal. Our long-term goal is to basically semi-retire in our 40's. My little forecasting spreadsheets show that it's likely possible to drop to 50% employment at that time, and drop out of the race completely by 50.

I think my only question revolves around our IRA's. I've done a lot of investment reading over the past few years, and I know that Roth IRA's are generally accepted as a better investment vehicle if you think your tax bracket might be higher in retirement (it won't be). I've always considered our Roth IRA's as some sort of hedge against other possibilities... or had an idea that maybe they were more flexible somehow. Should we me contributing to a Traditional IRA instead? Are traditional IRA's compatible with a possible 72t distribution in the future? I'm trying to figure out how to represent the difference in investing with Traditional IRA and Roth IRA in my forecasting spreadsheet. I haven't really ever delved into taxes much, just account balances for a rough look.

Any other thoughts?
32 - Married - Aiming for FI/ER in early 40s.
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Re: First Post - Overview + Roth v. Traditional?

Postby Beantown85 » Tue Jan 29, 2013 4:17 pm

You can only take a deduction on the traditional IRA if your AGI is 115k or less, and you can only get the full deduction if your AGI is 95k or less. I would stick with Roth IRA regardless, but in your situation it may be the only IRA option.
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Re: First Post - Overview + Roth v. Traditional?

Postby boknows » Tue Jan 29, 2013 4:41 pm

Beantown85 wrote:You can only take a deduction on the traditional IRA if your AGI is 115k or less, and you can only get the full deduction if your AGI is 95k or less. I would stick with Roth IRA regardless, but in your situation it may be the only IRA option.


Ahhh, I actually didn't realize that the TIRA income requirements were actually less than the Roth IRA. Interesting. I guess that solves that problem.
32 - Married - Aiming for FI/ER in early 40s.
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