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newbie Qs–non-working spouse contribute to IRA? How to invest 50k?

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  • Avatar Ha 
    Participant
    Status: Spouse
    Posts: 46
    Joined: 01/25/2018

    Not sure how much info you need to give advice on our situation.

    I’m a 44yo SAHM.  We have 4 kids.  MD makes 215k/yr.  We currently max out MD’s work TSP (415k) and backdoor Roth (73k).

    I have 96k Roth, 4k 403b, 26k Rollover IRA.  We don’t want to pay taxes on the rollover IRA so I can contribute to backdoor roth since in 2 yrs MD will work part-time and make a lot less (100k) and won’t have money to put in both my roth and his roth so we’re just focusing on funding his roth.  I can’t put any into Roth right now unless I pay taxes on the 26k, is that correct?

    We do have money now to invest (50k).  Currently have a taxable acct with Fidelity (35k) & vanguard (27k).  Wondering what my options are as a non-working spouse to make contributions towards retirement that would be more tax efficient than putting it in a taxable acct?

    We have started 529s for kids (30k/kid) but not yet fully funded.  However, we do expect our kids to pay 1/2 of college costs so not sure how much we’re shooting for yet–maybe 50k/kid?

    Advice on what to do?  Is putting $ in IRA an option for me without having to pay extra taxes? Better to put in 529?  Taxable acct?

    TIA for any advice you can give.

     

     

    #235598 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4452
    Joined: 01/08/2016

    Taxable until you don’t trigger pro-rata.
    Can you not move the IRA to the 403?
    What’s your marginal bracket?

    #235604 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 519
    Joined: 06/12/2017
    I can’t put any into Roth right now unless I pay taxes on the 26k, is that correct?

    Click to expand…

    Based on the facts you presented, yes.

    Wondering what my options are as a non-working spouse to make contributions towards retirement that would be more tax efficient than putting it in a taxable acct?

    Click to expand…

    You could do non-deductible Traditional IRA contribution of $6,000. When you’re in a lower tax bracket, you could convert your Traditional IRA balance to Roth and only owe conversion tax on the $26,000 originally in the Rollover IRA.

    We have started 529s for kids (30k/kid) but not yet fully funded.  However, we do expect our kids to pay 1/2 of college costs so not sure how much we’re shooting for yet–maybe 50k/kid?

    Click to expand…

    You could use part of the $50,000 to beef-up the 529 Plans.

    Advice on what to do?  Is putting $ in IRA an option for me without having to pay extra taxes? Better to put in 529?  Taxable acct?

    Click to expand…

    There’s nothing wrong with putting the money into a taxable brokerage account using tax-efficient funds. This may well be your best option.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #235605 Reply
    Avatar Ha 
    Participant
    Status: Spouse
    Posts: 46
    Joined: 01/25/2018

    I can’t put any into Roth right now unless I pay taxes on the 26k, is that correct?

    Click to expand…

    Based on the facts you presented, yes.

    Wondering what my options are as a non-working spouse to make contributions towards retirement that would be more tax efficient than putting it in a taxable acct?

    Click to expand…

    You could do non-deductible Traditional IRA contribution of $6,000. When you’re in a lower tax bracket, you could convert your Traditional IRA balance to Roth and only owe conversion tax on the $26,000 originally in the Rollover IRA.

    If I put 6k into a non-deductible trad IRA now for 2019, I don’t have to pay taxes on whatever is in the non-deduct trad IRA when I convert convert it to Roth in 2022?  Also, any advice on what to do with my 403b?  It’s only 4k but has high fees with Valic.  Valic was the only option given to us as teachers.  Should I leave it there or convert to something else?  Would love to consolidate as right now we’re juggling 4 different retirement accts (TSP, Vanguard, Fidelity & Valic).

    We have started 529s for kids (30k/kid) but not yet fully funded.  However, we do expect our kids to pay 1/2 of college costs so not sure how much we’re shooting for yet–maybe 50k/kid?

    Click to expand…

    You could use part of the $50,000 to beef-up the 529 Plans.

    Advice on what to do?  Is putting $ in IRA an option for me without having to pay extra taxes? Better to put in 529?  Taxable acct?

    Click to expand…

    There’s nothing wrong with putting the money into a taxable brokerage account using tax-efficient funds. This may well be your best option.

    Click to expand…

    Would you recommend putting more money in a taxable acct vs 529?

    If I put 6k into a non-deductible trad IRA now for 2019, I don’t have to pay taxes on whatever is in the non-deduct trad IRA when I convert convert it to Roth in 2022? Where would I open a non-deduct trad IRA?  In my Fidelity or Vanguard acct?

    Lastly, any advice on what to do with my 403b?  It’s only 4k but has high fees with Valic.  Valic was the only option given to us as teachers.  Should I leave it there or convert to something else?  Would love to consolidate as right now we’re juggling 4 different retirement accts (TSP, Vanguard, Fidelity & Valic).

    #235618 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 707
    Joined: 06/18/2018

    “since in 2 yrs MD will work part-time and make a lot less (100k) and”

    So, in your late 40s with 4 kids, invested assets of 712k (majority of which are pretax) plus 120k in 529s, plus whatever home equity you have the sole earner is going part time. You guys have big travel plans? Expecting an inheritance? Interesting to hear your plans behind that.

    #235621 Reply
    Avatar Ha 
    Participant
    Status: Spouse
    Posts: 46
    Joined: 01/25/2018

    we have 3 rentals (est value of 600k) and they should be paid off in 7-10 years.  plan on working till kids are finished high school. while we probably won’t be saving much towards retirement for the next 15 years, we don’t plan on touching any of what’s in our accts so it will have time to grow when we do retire.  yes, we’re planning on traveling during school holidays.

    after reading many of the fire blogs, we don’t want to sell everything & travel for 1 year nor do we want to keep working full-time while the kids are young and then have loads of money & time when they are out of the house.  we’d rather work longer for less hours and enjoy the now while we’re healthy & kids want to spend time with us. we’re pretty frugal and have always lived below our means.  currently we’re saving about 30-40% of our income.

    i don’t really know how much MD will make 2 yrs from now–i just know it’ll be a lot less than what he’s currently making.  so if he works .5 i was thinking 100k is a safe bet to plan on.  if we need more than 100k, he’ll work a bit more.  i think it’s pretty amazing that he can work .5 and still probably make 100k.  in other professions, people who are working full-time aspire to make that much.

     

    #235627 Reply
    Liked by Jack_Sparrow, JBME
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 707
    Joined: 06/18/2018

    That’s awesome. Good for you two for living the life you want. Enjoy your time with your kids!

    #235630 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1863
    Joined: 02/11/2019

    It depends on MD’s practice model. If he has to cover overhead then working halftime could be way less then half salary. Hopefully that is not the case.

    “Never let your sense of morals prevent you from doing what is right.”

    #235896 Reply
    legobikes legobikes 
    Participant
    Status: Physician
    Posts: 293
    Joined: 05/25/2017

    we have 3 rentals (est value of 600k) and they should be paid off in 7-10 years.  plan on working till kids are finished high school. while we probably won’t be saving much towards retirement for the next 15 years, we don’t plan on touching any of what’s in our accts so it will have time to grow when we do retire.  yes, we’re planning on traveling during school holidays. after reading many of the fire blogs, we don’t want to sell everything & travel for 1 year nor do we want to keep working full-time while the kids are young and then have loads of money & time when they are out of the house.  we’d rather work longer for less hours and enjoy the now while we’re healthy & kids want to spend time with us. we’re pretty frugal and have always lived below our means.  currently we’re saving about 30-40% of our income. i don’t really know how much MD will make 2 yrs from now–i just know it’ll be a lot less than what he’s currently making.  so if he works .5 i was thinking 100k is a safe bet to plan on.  if we need more than 100k, he’ll work a bit more.  i think it’s pretty amazing that he can work .5 and still probably make 100k.  in other professions, people who are working full-time aspire to make that much.

    Click to expand…

    Man, kudos on the four kids. We’ve tapped out at two. In many other respects we have similar goals. I’m not interested in saving up for early retirement at the expense of time spent as a family now. I saw your thread about a physician job with ‘summers off’ and I wanted to say that I have a job at an FQHC where I’ve been able to finagle 6-8 weeks off at a time. It’s technically 40 hours a week but with efficient charting and an admittedly lower patient load than most, it’s more like 32 hours a week, and I’m home 1.5 hours for lunch every day. I’m thinking of cutting it back further to four days a week which would be something like 28 actual hours spent in the clinic, and once my loans are payed off I’ll probably transition to part time. The operative thing is the frugal lifestyle – not only because then you are able to work less, but because it predisposes to actual family time. Also, if you have developed a robust family life, your kids still want to spend time with you when they are older.

    #244913 Reply

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