Roth IRA

[Combatdoc88]

---

Members do not see this ad.

I was searching this forum and couldn't find any recent threats about this topic.

I'm in my final year of medical school and am considering opening a Roth IRA. Do you guys have any advice about this matter? I figured my stipend should fulfill the income requirement. Also, when I'm finally making an attending's salary would that limit my ability to contribute to the roth IRA? Any help/advice would be welcome.

 

[DocRGR]

Roth is a great idea. You won't be over the income limit until you're a civilian attending. Income limits change year to year.

Plenty more info at whitecoatinvestor.com

 

[colbgw02]

Roth is a great idea. You won't be over the income limit until you're a civilian attending. Income limits change year to year.

Plenty more info at whitecoatinvestor.com

This assumes that one is single. My spouse's income put us above the Roth IRA contribution limit while I was still in residency. Also, the military's attending pay during initial ADSO may not be enough to preclude Roth contributions, but that doesn't mean there won't be substantial moonlighting income that will.

While in medical school, putting anything into an retirement account is a great idea, if you can. Once on active duty, the conventional wisdom has been that Roth IRA should be maxed out before TSP is started, but I think the new Roth TSP may have changed the calculus.

 

[denali]

If you start to bump into the Roth IRA income limits, you can always do a "backdoor Roth IRA" where by you make the max nondeductible contribution to a traditional IRA, then convert that to a Roth IRA. This works because there are no income limits on a trad IRA or conversion. This loophole's been around now for a few years. Google it and there are lots of articles on it.

 

[DrMetal]

Can anyone comment on the TSP R-IRA?

 

[colbgw02]

If you start to bump into the Roth IRA income limits, you can always do a "backdoor Roth IRA" where by you make the max nondeductible contribution to a traditional IRA, then convert that to a Roth IRA. This works because there are no income limits on a trad IRA or conversion. This loophole's been around now for a few years. Google it and there are lots of articles on it.

True. I've done this the last couple of years, but what I was trying to point out is what should be the first investment priority for someone with relatively little left over income. I don't think that the IRA conversion should be prioritized above Roth TSP. And, depending on one's expected ROI, it's possible that even traditional TSP should be funded before an IRA conversion.

 

[Combatdoc88]

Thanks for all of your insight. I appreciate it.

 

[pgg]

Can anyone comment on the TSP R-IRA?

There's not much to say. The TSP system is excellent. Whether or not Roth vs not-Roth is better for you depends on your income now, your predicted income in retirement, and your tax particulars.

I'm contributing the max $17.5K to it while I'm deployed, because it's tax-free going in, growing, and coming out later. When I get home, I'll stop that and contribute to the regular TSP, because my tax bracket will benefit from the deduction.

 

[DrMetal]

There's not much to say. The TSP system is excellent. Whether or not Roth vs not-Roth is better for you depends on your income now, your predicted income in retirement, and your tax particulars.

I'm contributing the max $17.5K to it while I'm deployed, because it's tax-free going in, growing, and coming out later. When I get home, I'll stop that and contribute to the regular TSP, because my tax bracket will benefit from the deduction.

Thanks. I was wondering what the differences were between a TSP RIRA vs a commercial (say USAA RIRA), not so much the differences between roth amd non roth. For instance, I have a Fidelity RIRA. Would i be smart to stop contributing, transfer to a TSP RIRA and contribute tothat? (SDN: where i go for financial advice, b/c my broker is no where to be found)

 

[dwb8p]

Thanks. I was wondering what the differences were between a TSP RIRA vs a commercial (say USAA RIRA), not so much the differences between roth amd non roth. For instance, I have a Fidelity RIRA. Would i be smart to stop contributing, transfer to a TSP RIRA and contribute tothat? (SDN: where i go for financial advice, b/c my broker is no where to be found)

Your terminology and understanding of these investment vehicles is a little off. A TSP is equivalent to a 401k/403b on the civilian side. You can have both traditional (pre-tax) and Roth (post-tax) contributions up to $17.5k per year (combined), and you can't rollover a TSP to an IRA (or other 401k/403b plan) until you leave the military. This is different from a IRA, which you can have in addition to a TSP, and contribute up to $5.5k per year (and also $5.5k for your spouse even if they don't work). Like TSP's, IRAs also come in pre-tax (traditional) and post-tax (Roth or nondeductible) flavors, but if you already have access to a TSP/401k/403b (as you do) you cannot contribute to a pre-tax (traditional) IRA; you can only contribute to a post-tax (Roth or nondeductible) IRA, and most residents and junior attendings choose Roth because they fall under the annual income limits for Roth contributions.

TSP is one of the best investment vehicles because the index funds it offers are extremely low cost (even less costly than some of the cheapest Vanguard/Fidelity/DFA funds).

To (kind of) answer your question of should you switch your contributions to a Roth TSP instead of a Roth IRA at Fidelity: well, you should really try to max out both ($17.5k Roth TSP, $5.5k Roth IRA for you, $5.5k Roth IRA for your spouse), but if you don't have enough to do that right now, I would continue maxing out your Roth IRA at Fidelity for simplicity sake, then start contributing to your Roth TSP.

Spend a few hours reading whitecoatinvestor.com or bogleheads.org (http://www.bogleheads.org/wiki/Getting_Started) if this is unclear.

 

[DrMetal]

.

cool, good advice, thanks.