New in USA, opening ROTH, but in phase out period

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New in USA, opening ROTH, but in phase out period

Postby SAinUSA » Sun Mar 24, 2013 7:15 pm

Good day fellow bogleheads,

I just moved to the USA a few years ago, and want to open up a Roth IRA while I'm still under the contribution limit, hopefully I can build it up a bit before I can't contribute at all.

My MAGI for 2012 was $121,929, I used a calculator online and figure I can contribute only $1860. I have until April 15 to do this. I will probably cap over 127k in the next few years so I just want to put what I can in for the next couple of years.

Seeing it's such a low amount, I would like to invest it as aggressively as I can... This of course isn't my retirement fallback but I would like to take advantage as much as I can, as I won't be relying on this to live off, just tax free money when over 60

I'm looking at vanguard retirement funds, but I simply want to have it in the most aggressive portfolio, I don't think I can do VTSMX as it's below the opening limit

Any suggestions?

Thanks!
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Re: New in USA, opening ROTH, but in phase out period

Postby BolderBoy » Sun Mar 24, 2013 7:41 pm

SAinUSA wrote:Any suggestions?


Not much for us to go on, but...

Do you have a traditional IRA? If not, you could bypass the phase out limitations and do a backdoor Roth at the full amount.
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Re: New in USA, opening ROTH, but in phase out period

Postby SAinUSA » Sun Mar 24, 2013 7:43 pm

I don't have any traditional IRA here, but thinking of opening on soon

Where can I look into doing this backdoor, that sounds good!

I haven't done anything in USA, just get paid and get my tax back, and trade some stocks.

I'm just getting started with this, I decided to live here permanently (sponsored green card!). I'm 30 btw
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Re: New in USA, opening ROTH, but in phase out period

Postby Bob's not my name » Sun Mar 24, 2013 7:59 pm

Do you have an employer retirement plan like a 401k? Contributions to a traditional 401k will reduce your MAGI and keep you eligible for direct Roth IRA contributions. For 2013 the Roth eligibility phaseout starts at $112,000.

Also, I think your math is wrong for 2012. I make it:

($11,929/$15,000)*$5,000 = $3,976 disallowed, $1,024 allowed

I think you are using 2013 numbers for a 2012 computation:

($9,929/$15,000)*$5,500 = $3,640 disallowed, $1,860 allowed --> wrong answer
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Re: New in USA, opening ROTH, but in phase out period

Postby SAinUSA » Sun Mar 24, 2013 8:15 pm

Ah ok I did the proper calculation like you did and that is right. So it's even less, what would be the best place to invest such little money in Roth ?

I'll be opening up a traditional soon starting 2013
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Re: New in USA, opening ROTH, but in phase out period

Postby Bob's not my name » Sun Mar 24, 2013 8:31 pm

Do you have an employer plan?
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Re: New in USA, opening ROTH, but in phase out period

Postby SAinUSA » Sun Mar 24, 2013 8:33 pm

Yeah they don't match though
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Re: New in USA, opening ROTH, but in phase out period

Postby Epsilon Delta » Sun Mar 24, 2013 9:56 pm

If you are not planning on retiring in the US you will want to look at the tax treaty between the US and your home country and where ever you are planning on retiring before you start investing in tax deferred accounts. In some cases this can get quite messy and you'll want specific advice before proceeding.
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Re: New in USA, opening ROTH, but in phase out period

Postby SAinUSA » Mon Mar 25, 2013 1:03 am

Ok I found out all about back door ROTH... awesome!!!
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Re: New in USA, opening ROTH, but in phase out period

Postby Bob's not my name » Mon Mar 25, 2013 4:00 am

SAinUSA wrote:Yeah they don't match though
Neither does your Roth IRA. If you do plan to stay in the US, you should be using your employer plan to reduce your taxes.
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Re: New in USA, opening ROTH, but in phase out period

Postby SAinUSA » Tue Mar 26, 2013 1:13 am

Thanks I'm going to open up a employer plan 10% of salary

And do a $5k roth backdoor in VTSMX for 2012

Does that sound like a good plan?
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Re: New in USA, opening ROTH, but in phase out period

Postby Bob's not my name » Tue Mar 26, 2013 4:00 am

Sure. Then next year you may be able to make a direct 2013 Roth IRA contribution, because your 2013 MAGI may be below the phaseout thanks to the 401k contribution.
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