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April 13, 2011


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It's a little bit more work but since 2010 you can convert any sized traditional to a Roth IRA and pay the tax regardless of your income. So the Roth IRA contribution limits are now moot. If you don't qualify to contribute to a Roth you can simply contribute to a traditional and as soon as the money clears, convert it to a Roth and pay the tax for the conversion which will offset the deduction you got for putting it into the traditional IRA.

So the real question is still traditional or Roth, because anyone can now contribute to a Roth regardless of income by using the mechanism I just described.

Do you think your income taxes will be lower or higher in your golden years? My husband and I are "only" taxed at the 15% rate right now, so we contribute to Roth IRA's since we are pretty sure that our taxes will be much higher in 25-35 years.

At this point in time, the Roth IRA is an easy decision to make since your marginal tax rate is probably 25% and likely to go up soon after your wife completes her residency. It totally makes sense to contribute to a Roth these three years.

Once you are in a higher tax bracket you just have to do what Apex just outlined to contribute in a roundabout way to your Roth. You will not receive any tax breaks (with your higher income) when you contribute to a regular IRA, so you might as well just convert it to a Roth at that time as well.

I would totally contribute to a Roth IRA now while your tax rate is at the lowest it will probably be for a long, long time.

I would think Roth would be the way to go considering they don't qualify for a tax deduction because of their income.

Hmm, if you both open a Roth IRA and contribute the max ($5,000 + $5,000) * 3 = $30,000.

Heck yeah, then start a traditional when the time comes. Then again, if your wife starts her own business why not consider a SEP IRA or other self-employed forms of retirement accounts.

I would take advantage of lower tax bracket and save in a Roth for those three years. That is what my fiance and I are doing.


Like Money Reasons states when you open your own practice you will have different options under the business that may be better than the Roth. By the way you will be saving money which is the main goal.


Without a full picture of their existing savings, I can only recommend a Roth. The Roth can & does serve as an emergency fund because the orignal contributions can be withdrawn at any time for any reason. Even MD's need an emergency fund.

As Aaron said, it's unlikely you'll be eligible for the deduction for a traditional IRA, so you might as well throw everything you can into Roth IRAs. And when your income is too much for a direct Roth contribution, as buddy68 said, do the Traditional IRA -> Roth IRA route.

Do you have access to any retirement programs with matching funds? Either a 401k or similar? I'm' guessing not, but if you do then you should absolutely take advantage of any employer matches offered first and fore most. Otherwise...

Sure go for the Roth.

You are both physicians. Most of your working careers you will be in a high tax bracket since you will have high combined income. So today your tax bracket (probably 28%) is lower than it is likely to be in the future. Two physicians will be able to pile up a pretty large retirement nest egg as well and will likely face a fairly high tax bracket in retirement too. You have a fairly safe bet that your tax rate today is lower than it will be in the future. So a Roth makes sense.

I am assuming you'll both work as physicians for most of your lives. If one or both of you plans to stop working early then that may be a different situation. For example, if the wife decides to stop work and stay at home with the kids or if the husband plans to put in 20 years in the Air Force then retire then that could make the income much lower later in life and give you lower tax rates in the future and in retirement.

Roth it while you can - hopefully soon you won't be allowed to contribute!

I agree with the majority who say to go with a Roth IRA. Odds are that your tax bracket now is lower than it would be when you withdraw.

However, I just want to clarify what Aaron is saying for others who read this. If you an "active participant" in a retirement plan (ex: 401(k)), then yes your ability to deduct contributions to a Traditional IRA is limited if you make above a certain income. However, if you are not an active partipant, you can deduct Traditional IRA contributions regardless of your income level. There is a box on your W-2 which says whether or not you are considered an active participant. It is the "Retirement Plan" box.

Check out Publication 590 from the IRS, which has all of the official rules regarding IRA's. Don't take my or anybody else's word for it. Go to the source!

Definitely look at a ROTH. Three years is better than none, and the tax diversification down the road for having taxable and non-taxable accounts could be handy.

The other thing to bear in mind is that ROTH limits aren't based on your GROSS income, but on your AGI. Depending on your tax situation in the future, you may find you have enough deductions from various sources to allow full or partial contributions in the future as well. It's really hard to predict what the tax scenario will look like to 3-5 years down the road. If you might be able to make a contribution, it could be very handy to already have accounts set up on which you have started the 5 year clock.

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