6

Age 28 (Turn 29 in November)
Gross Income - 110,050
Retirement (At the start of 2015) - $12,000 in Roth IRA

My current contribution for the year is aimed at:

  • 9,000 in Roth 401k
  • 9,000 in Traditional 401k
  • 5,500 in Roth IRA
  • 1:1 on First 4% of Salary Plus Discretionary Contribution Based on
    Profit (Traditional 401k as a lump sum)

However, I received advice that I shouldn't have zero balance in a traditional IRA.

I know in the instance that if my MAGI exceeds a certain point, I can not contribute the maximum to the Roth IRA; a traditional IRA and subsequent backdoor is the way to go. But I am currently at a point where my income allows me to put the full $5500 in my Roth.

Do I ever consider the thought to splitting my IRA contributions?

7

You can do the Roth IRA, but I think your income is too high to take a deduction on the traditional IRA.

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By the way, this is the 2015 tax table -

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You look like you are in the 28% bracket. A good place to be, but I'd be putting more money pre-tax in the 401(k) and consider converting in years that your rate may be lower. It's easy to get married, buy a house, and that same income puts you in the 15% bracket.

The truth is, no one can project 5 years out, let alone 40, and a mix like you have is as good an approach as any, even if I'd lean more pretax. Remember, your $4400 match is on the pretax side, so you are close to 50/50 as is.

5

I know in the instance that if my MAGI exceeds a certain point, I can not contribute the maximum to the Roth IRA; a traditional IRA and subsequent backdoor is the way to go.

My understanding is that if you ever want to do a backdoor Roth, you don't want deductible funds in a Traditional account, because you can't choose to convert only the taxable funds.

From the bogleheads wiki:

If you have any other (non-Roth) IRAs, the taxable portion of any conversion you make is prorated over all your IRAs; you cannot convert just the non-deductible amount. In order to benefit from the backdoor, you must either convert your other IRAs as well (which may not be a good idea, as you are usually in a high tax bracket if you need to use the backdoor), or else transfer your deductible IRA contributions to an employer plan such as a 401(k) (which may cost you if the 401(k) has poor investment options).

  • 2
    +1 - I won't correct you, you are right. This is why I'd focus on pretax inside the 401(k), thus avoiding the potential backdoor tax issue. – JoeTaxpayer May 30 '15 at 23:01

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