Investing small gift tIRA or Roth

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Coolguy8877
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Joined: Thu Oct 03, 2019 8:41 am

Investing small gift tIRA or Roth

Post by Coolguy8877 » Tue Jan 14, 2020 1:27 am

My mother (57) just breached the 22% bracket in 2019 (41k). She has a tIRA with ~15k and a small pre-tax 401k. Her mother is taking RMDs and gifted my mother 3k.

She would like to put this in an IRA to grow until she needs it. Would she best be served by contributing to a Roth IRA? Or is it possible that the tIRA tax deduction benefit outweighs the Roth tax free growth?

Am I missing anything else?

Dottie57
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Re: Investing small gift tIRA or Roth

Post by Dottie57 » Tue Jan 14, 2020 5:54 am

Since it doesn’t sound like your mother NEEDS the income reduction to reduce taxes (or does she?), I would put it in Roth IRA. Roth is tax free at retirement age.

livesoft
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Re: Investing small gift tIRA or Roth

Post by livesoft » Tue Jan 14, 2020 6:08 am

With her income and her assets, why don't you think the traditional IRA is not tax-free growth? In her retirement, she can probably be withdrawing the tIRA without paying any taxes on the withdrawal, right?
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Topic Author
Coolguy8877
Posts: 31
Joined: Thu Oct 03, 2019 8:41 am

Re: Investing small gift tIRA or Roth

Post by Coolguy8877 » Tue Jan 14, 2020 6:40 am

livesoft wrote:
Tue Jan 14, 2020 6:08 am
With her income and her assets, why don't you think the traditional IRA is not tax-free growth? In her retirement, she can probably be withdrawing the tIRA without paying any taxes on the withdrawal, right?
While I see both the tIRA and Roth as tax-free growth vehicles, I don't see how she would be able to withdraw the tIRA without paying taxes on the distribution.

livesoft
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Re: Investing small gift tIRA or Roth

Post by livesoft » Tue Jan 14, 2020 8:47 am

Coolguy8877 wrote:
Tue Jan 14, 2020 6:40 am
I don't see how she would be able to withdraw the tIRA without paying taxes on the distribution.
She will be in one of the more than 40% of families who don't pay Federal income taxes. You can help her figure out her tax situation later on when she is not working. It takes quite a lot of income in retirement to have to pay income taxes. She apparently has almost nothing in retirement plans now, so how much will she be making in retirement anyways?
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