Any advantage to IRA

Quote from stubbornboy : Filing tax joint with wife. Combined income 150K (sum of all W2) We didn't have 401k or any IRAs until last year when we opted a 401k for wife upto the max employer matches. It has only about $2000 So if we open a traditional IRA , the only advantage is that we get interest (or returns) on the whole amount rather than paying taxes upfront right? Because in the end when this is withdrawn, the entire amount(and not just the interest) gets taxed based on the prevailing tax rates. And given that interest rates are so low here, it is really not a good deal to do a traditional IRA..Am I right? Roth seems good. But if wife has a retirement plan then looks like we can't contribute :-(

I'm not aware of any restriction to contributing to a roth because you already participate in a work sponsored retirement plan. I contribute to my employee sponsors 401K and a roth. There is an income limit for a roth.

http://www.rothira.com/income-lim...dated-2013

Quote from oakfan52 : I'm not aware of any restriction to contributing to a roth because you already participate in a work sponsored retirement plan. I contribute to my employee sponsors 401K and a roth. There is an income limit for a roth. http://www.rothira.com/income-lim...dated-2013

you are right. I misread.
So I shd be good to do $5000 in Roth looks like

The other advantage for a traditional IRA is that you deduct that amount from your income, so instead of $150k, you have $145k. However, then you will be taxed on principal and gains when you withdraw. A Roth IRA you pay with after tax dollars and any gains will not be taxed when you withdraw (dont be surprised if the IRS changes that ruling and gains will be taxed by the time you take that money out).

Interest rates do not matter on which IRA option you should choose. You should base that decision on which tax bracket you feel you will be in when you need the money. Also, if you want the income credit or not. If that $5k will drop you to another tax bracket, its probably a no brainer. You still have up to April 15th to put money towards 2012.

Contribution limits for traditional IRA's start to be reduced/phased out at incomes of $95,000 ($92,000 for 2012) for a married couple, so at $150,000 listed by the OP, I doubt that you can contribute to a traditional IRA. You can still do a Roth if you wish as the limits are much higher. (see below post of mine for details).

As for traditional IRA and interest rates, you don't have to put the money into CD's or savings accounts (common misconception). You can open one at any brokerage and put the money in anything you like: Stocks, mutual funds, bonds, ETF's, money market, CD's, etc.

Quote from Engineer : Contribution limits for traditional IRA's start to be reduced/phased out at $95,000 for a married couple, so at $150,000, I doubt that you can contribute to a traditional IRA. You can still do a Roth if you wish as the limits are much higher. As for traditional IRA and interest rates, you don't have to put the money into CD's or savings accounts (common misconception). You can open one at any brokerage and put the money in anything you like: Stocks, mutual funds, bonds, ETF's, money market, CD's, etc.

Your first paragraph is incorrect, or poorly worded.

I also can use my roth as a second emergency find. You can remove your orgional contributions without tax penalty at anytime. Who knows if they will ever change this but right now that's kind of a nice perk.

Quote from vaultaddict : Your first paragraph is incorrect, or poorly worded.

Yes, it is incorrect (in that it was $92,000 for 2012 and $95,000 for 2013) and poorly worded too. Sorry. Saw the 2013 levels earlier and mistook them for 2012 levels.

http://www.irs.gov/Retirement-Pla...tributions

Clearly states that Joint Return income phaseouts for regular IRA's start at $95,000 ($92,000 for 2012) with ROTH IRA's having the following (from here: http://www.rothira.com/income-lim...dated-2013 )

For married couples filing jointly: The phase-out has gone up $5,000. The new phase-out range for 2013 is $178,000 to $188,000, up from $173,000 to $183,000 in 2012.
For singles: The phase-out has gone up $2,000. The new phase-out range for 2013 is $112,000 to $127,000, up from $110,000 to $125,000 in 2012.

side note - any way to see AGI/MAGI in TurboTax BEFORE you file? What I am looking for is whether or not I am on the brink of a tax bracket, and based on that determining if I can make an IRA deposit. the problem is - TT (apparently) wants be to file before it will show me the forms.

Quote from Dr. J : side note - any way to see AGI/MAGI in TurboTax BEFORE you file? What I am looking for is whether or not I am on the brink of a tax bracket, and based on that determining if I can make an IRA deposit. the problem is - TT (apparently) wants be to file before it will show me the forms.

You can see the forms if you go to the file section. Click through a few times until you get an opportunity to preview your returns.

If I use the Roth IRA money(principal) for high risk investment and end up losing it, is that tax deductible?

Quote from stubbornboy : If I use the Roth IRA money(principal) for high risk investment and end up losing it, is that tax deductible?

no, just like the gains arent taxed

Also note there is a loophole to allow for Roth IRA contributions regardless of income - it involves an after tax contribution to a traditional IRA with an immediate rollover to Roth. Google the loophole if you want more info.