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Me: 65. Loving spouse: 67. I will still be working at least part-time after spouse retires early next year. I expect to do that as long as I'm able. Spouse has expressed an interest in working in the business as well. That'll be fun.
According to the Motley Fool, as long as I have sufficient earned income, I can contribute $6,500 to a Roth IRA for myself and another $6,500 to DH's. Neither of us have a Roth now.
We have no heirs so this wouldn't be a legacy strategy, just a recognition that at least one of us is likely to make it to age 80 and hopefully benefit from 15 years of investment gains.
I figure most retirees don't do this because they don't want to even think about working after they retire. But I enjoy it and there are only a few things I like better than making money. It's a game to me.
What you're missing: if you already have an IRA, having a Roth IRA also allows you to do partial Roth conversions. You'll owe tax on the amount converted, but you'll be able to move some of the money you've already saved out of a retirement account subject to RMDs and into an account with no RMDs.
I can see absolutely no drawbacks to you and your husband opening Roth IRAs. The only drawback is the income cap on direct contributions to one (which I wish Congress would do away with).
The ROTH IRA is a tax wrapper that removes all Federal (maybe your state too) income taxes from your earnings in the ROTH. You can invest in anything you could invest in in a taxable account so there is no reason not to have a ROTH that I can see.
On doing some further reading, about the only drawback I can see is that I'll have to be careful to keep our MAGI below a certain dollar amount. I think we've already exceeded that for this year. If it looks like he's not going to work at all next year, it should be OK to open a Roth.
On doing some further reading, about the only drawback I can see is that I'll have to be careful to keep our MAGI below a certain dollar amount. I think we've already exceeded that for this year. If it looks like he's not going to work at all next year, it should be OK to open a Roth.
If your other retirement monies are still in a 401k or 403b and not in a regular IRA, you could contribute to a Roth IRA this year via the backdoor. The Backdoor Roth IRA: A Complete How-To
Few things beat the tax free growth of a Roth IRA.
there is no more growth in a roth than a traditional. once you equal out the dollars growth can be identical.
what makes the difference is all the things linked to taxable income in retirement and the fact you have no rmds with a roth , but growth is not really a benefit ..
people calculate the comparisons to roths wrong by taking money from outside the roth to pay the taxes up front , then they compare it to taking the taxes out of the traditional .
not an apples to apples comparison .
5k in an a roth ira cost you about 6666.00 in pretax dollars in the 25% bracket ..
if that 6666.00 is put in a traditional 401k and it doubles you have 13,332.00 , less 25% if we keep brackets the same , that is 10k .
if that roth doubled it is the same 10k .
a roths power is in maybe not getting your ss taxed , paying less in medicare premiums , getting an aca subsidy , no rmd's , the ability to compound tax free after 70-1/2 , etc ..
but tax free growth by itself is not doing a thing when you compare apples to apples.
there is no more growth in a roth than a traditional. once you equal out the dollars growth can be identical.
what makes the difference is all the things linked to taxable income in retirement and the fact you have no rmds with a roth , but growth is not really a benefit ..
people calculate the comparisons to roths wrong by taking money from outside the roth to pay the taxes up front , then they compare it to taking the taxes out of the traditional .
not an apples to apples comparison .
5k in an a roth ira cost you about 6666.00 in pretax dollars in the 25% bracket ..
if that 6666.00 is put in a traditional 401k and it doubles you have 13,332.00 , less 25% if we keep brackets the same , that is 10k .
if that roth doubled it is the same 10k .
a roths power is in maybe not getting your ss taxed , paying less in medicare premiums , getting an aca subsidy , no rmd's , the ability to compound tax free after 70-1/2 , etc ..
but tax free growth by itself is not doing a thing when you compare apples to apples.
I don't analysis it in depth but more like I think most people will do. (But technically you are correct) Lets say I am in the 25% tax bracket now and in retirement. I put 1,000 in the ROTH. No tax savings so I missed out on a 250 tax savings that I would have spent by year end. At a 10% growth the 1,000 will be worth almost 2400. I will save 600 in taxes compared to the 250 in taxes I paid at year one. Yes I have not considered the time value of money, inflation, and the earnings I could have gotten by investing the 250. My assumption is that the 250 never gets invested by most people so the best alternative to having more cash in hand at retirement is to go the ROTH approach.
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