2) Should I have my bond allocation in a tax-free muni fund and should I use a single bond fund?
retiredjg wrote:Welcome to the forum! Are you and your wife married filing separately? That is the only way I think you could have different treatment for your IRAs. But I think the phase-out for both Roth IRa and deducting traditional IRA is $0 to $10k isn't it? That would make neither of you eligible.
hoppy08520 wrote:I wondered about that too, but figured that he might not be eligible for a retirement plan at work, which pushes his traditional IRA deduction phaseout up to $178,000 (for 2013), which is well above their joint AGI. She, on the other hand, might have a retirement plan at work which means she cannot do traditional deductible IRA but can do Roth IRA.
dms1873 wrote:1) Should I convert our traditional IRAs into our Roth IRAs? I understand I'll pay the tax but is the benefit greater? I'm leaning in this direction.
retiredjg wrote:1) Paying 25% now vs paying 25% later is a wash. It will result in the same amount of money for you to spend. There is no magical compounding going on in a Roth account. This means you have nothing to lose by waiting if you feel you will be in the 25% bracket later. But it could also mean if you expect taxes to go up between now and then, getting in at 25% now could be attractive.
2) If you drop into the 15% bracket when fully retired, paying 15% later is better than paying 25% now. If your pension is small, you might drop into the 15% bracket. If your pension is large, you may not drop into the 15% bracket. If your wife ends up with a pension too, it is less likely you will drop into the 15% bracket.
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