Roth IRA vs Traditional IRA. What makes the most sense?

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  • #82310 Reply

      Background: My filing status is single and I currently max out my employer 401k (pretax). My income is below the Roth IRA limits so I’m able to contribute the full amount. My AGI is high enough though that I don’t get a deduction for doing a traditional IRA.

      Should I continue doing the Roth since I don’t get the Tradtional IRA tax break? Or is there something I’m missing?

      #82311 Reply

        If you don’t get the deduction, of course Roth is better.

        #82312 Reply

          I’d go out on a limb, and say it never makes sense to leave money in a non-deductible traditional IRA. So to answer your question, yes Roth IRA.

          #82313 Reply

            I guess I’m not sure what you’re doing: you say you’re maxing out your 401k (pre-tax) but then ask if you should “continue” doing the Roth…

            The basic rule of thumb:

            1) IF your employer offers a match to your 401k, then put up to the max match in your 401k first.

            2) Max out your Roth

            3) If you’re still under the max contribution limits after 1&2, then go back to the 401k and max that out (up to what you can and are able).

            Alternatively, for #3, you could forego the 401k and just start a taxable investment account. I’m not saying that’s necessarily what I would personally do, but it’s an alternative.

            Perhaps something else I might look into would beat back-door Roth conversion… Especially if your company does NOT offer a match. In that case, I’d stop contributing to the traditional/401k altogether and look to convert the existing amount to a Roth IRA. (Note: there ARE tax implications for doing so, so before doing that, consult with a tax professional and/or CFP.)

            #82314 Reply

              Roth IRA, and any other funds in a taxable brokerage account. Or do what I do and don’t bother with an IRA. It’s just another investment vehicle.

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            Reply To: Roth IRA vs Traditional IRA. What makes the most sense?
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