Max out TSP, but make too much for Roth IRAs. How else do we save for retirement?

[Anonymous]

We are two fed employees. HHI $215K.

We max out our TSPs, but we make too much to contribute to a Roth IRA. We also can't deduct contributions to a Traditional IRA. But should we be putting money in a Traditional IRA anyway? Or focus on other non-retirement investments?

We have an emergency fund, save money in a 529 for our DS, and have several miscellaneous mutual fund accounts. I guess we could increase our money in any of those accounts, but I'm feeling like we need to catch up a little in the retirement area after reading some of the other threads. We are 35 and 37 with almost $200K in our two TSP accounts and about $100K in our Roth IRA accounts, which we started when we weren't making as much.

[Anonymous]

I thought the financial income limit on Roth IRAs had been eliminated. Am I wrong?

[Anonymous]

Contribute to a non deductible Ira. Then convert to a Roth. There is an income limitation for contribution, but not conversion.

Contribute for 2012 first, if you still have money, then contribute for 2013. Still have money? Convert any prior employer 401ks and iras to roths.

[Anonymous]

buy tax efficient mutual funds from a low cost provider.

[Anonymous]

Anonymous wrote:Contribute to a non deductible Ira. Then convert to a Roth. There is an income limitation for contribution, but not conversion.

Contribute for 2012 first, if you still have money, then contribute for 2013. Still have money? Convert any prior employer 401ks and iras to roths.

This is good advice, except I probably wouldn't spend any money to convert existing accts to Roths. Instead try a low cost mutual fund, or i-bonds.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Contribute to a non deductible Ira. Then convert to a Roth. There is an income limitation for contribution, but not conversion.

Contribute for 2012 first, if you still have money, then contribute for 2013. Still have money? Convert any prior employer 401ks and iras to roths.

This is good advice, except I probably wouldn't spend any money to convert existing accts to Roths. Instead try a low cost mutual fund, or i-bonds.

I spent over $100k converting. But I am young and betting on high inflation. And I love the idea of tax free for life, especially on 30+ years of growth. I acknowledge it could turn out poorly, but I doubt it. And op was looking to max retirement. After maxing 401k it is the next option.

[Anonymous]

We max a traditional IRA each year, even though we get no tax break. The money grows tax free, and it's another disciplined savings vehicle. Worth it instead of socking another $11K into taxable investments for us.

[Anonymous]

Anonymous wrote:Contribute to a non deductible Ira. Then convert to a Roth. There is an income limitation for contribution, but not conversion.

Contribute for 2012 first, if you still have money, then contribute for 2013. Still have money? Convert any prior employer 401ks and iras to roths.

We do this.

[Anonymous]

We also max out our TSP and husbands 401K. If I am 42 and have about $200k in retirement, and my DH (43) has about $450k in retirement, should we still be trying to open a traditional IRA and then convert it to a Roth? Or are we too old to try to do this?

[Anonymous]

Anonymous wrote:We also max out our TSP and husbands 401K. If I am 42 and have about $200k in retirement, and my DH (43) has about $450k in retirement, should we still be trying to open a traditional IRA and then convert it to a Roth? Or are we too old to try to do this?

If you make too much to contribute to a deductible IRA and you want to save more in retirement accounts then you are not too old.

The age thing might matter when you are deciding whether to convert an existing 401(k) and pay the tax on it (or even to choose whether to invest in a Roth IRA nstead of a deductible IRA), but if you are just looking for a place to save more money after you max out your 401(k) and you make too much to contribute to a deductible IRA then there's no reason not to do the traditional, nondeductible IRA-> Roth approach because it is in addition to your other tax-deferred savings and it is "free" tax deferral (i.e., you have to contribute after-tax dollars to your IRA anyway, so why not make it a Roth so the withdrawals are tax-free?). One of these days Congress will get around to closing this loophole. Just hope they don't decide to do some kind of surtax on Roth withdrawals in 20 years...

[Anonymous]

You can just save money regardless of the tax implications, you know. The majority of our "retirement" savings is in a simple brokerage account.

[Anonymous]

Open a brokerage account at schwab, trade, fidelity, etc. Start by purchasing high dividend yielding stocks and ETFs. This strategy is best if it can be done within a self-directed IRA so your tax burden will delayed until your retirement era cash withdrawals begin.

Contribute as much as you can and as often as you can.

Reinvest your dividends until you are generating a fair amount of monthly revenues (cash). By this time several years of watching the markets and other trends will have passed. By this time you'll be stock market savvy enough to begin using your revenues to begin picking some out-of-favor stocks. You'll be savvy enough to begin to make some "contrarian" trades that may double or triple over time.

Manage your own retirement fund. No one care about your money more than you do. There is nothing exotic about owning stocks in good quality companies and letting their dividends accumulate over time. Being a day trader is much more exotic and should be reserved only for people who are either very smart or very stupid. Most of us do not fit into either of those extremes.

You can do this . . . it's pretty easy really. It's not rocket science. Pay attention to the world around us and any can become comfortable and perhaps even wealth just by making wise decisions. One last thought - if someone offers you something and it sounds to good to be true - probably is. Start slow and manage your own money. No one crass about your money and your retirement more than you.

[Anonymous]

Sorry about the many typos, but I'm sure you get the drift.

Good luck!!!

[Anonymous]

Anonymous wrote:

Anonymous wrote:Contribute to a non deductible Ira. Then convert to a Roth. There is an income limitation for contribution, but not conversion.

Contribute for 2012 first, if you still have money, then contribute for 2013. Still have money? Convert any prior employer 401ks and iras to roths.

This is good advice, except I probably wouldn't spend any money to convert existing accts to Roths. Instead try a low cost mutual fund, or i-bonds.

+1

But you need to be careful if you have older deductible IRAs (non-Roth traditional IRAs for which you got a tax deduction for contributing). When you convert the new non-deductible IRA to Roth the IRS looks at all traditional IRA money that you have.

We are planning to do the "backdoor" Roth as soon as we roll over older traditional IRA money into TSP.

http://www.bogleheads.org/wiki/Backdoor_Roth_IRA

[Anonymous]

OP, thanks for all the advice!

I'm familiar with the conversion loophole, but I guess I didn't necessarily want to go there because all the transactions stress me out. I know it's really not that big of a deal, but for some reason I worry we're not doing things right.

A couple of years ago, I finally finished converting all of an old traditional/rollover IRA to a Roth and that was a relief. We also had to recharacterize some ROTH contributions once we went over the income limit. We then converted that money back to a Roth. My head was spinning a little from that! So now I'm happy to be done with all those transactions and have things sitting cleanly in one Roth account.

But it sounds like we should consider letting things get "messy" again and doing the traditional to Roth conversion for 2012 and/or 2013. The Bogleheads link was particular helpful. So let me be sure I understand this - there's no waiting period between contributing to a traditional and converting to a Roth? We can literally do that the same day?