Formula for determining Roth or IRA for 2012 now?
Is there any best way to determine which IRA (Roth or trad) wife and I can contribute to for 2012 now? Found an online worksheet here:
http://www.smartmoney.com/personal-fina … ions-9563/
If I use this should I use our AGI from 2011 which will be higher than this year? If not this tool, what are your thoughts?
Permalink Submitted by Alan Spross on Thu, 2012-09-06 17:15
You link did not work, but I found this page at their site:
http://www.smartmoney.com/calculator/retirement/which-ira-should-i-choos…
For 2012, the MAGI for married couples to deduct a TIRA contribution rises by 2,000 over 2011 (92k to 112K for covered individual) and by 4,000 (173k to 183K) for a spouse that is not covered by a plan at work. For a Roth IRA, the MAGI also increases to 173 to 183k and the result applies to both spouses.
But if you qualify for both a deductible TIRA contribution OR a Roth contribution, this won’t tell you which is best.
If you don’t qualify for a deductible TIRA contribution, then a Roth contribution is always better than a non deductible TIRA contribution
If you don’t qualify for either, then you might consider the non deductible TIRA contribution.
Also, note that MAGI is different than AGI on your tax return. You may have to add some deductions back to AGI to get to MAGI to determine the TIRA deduction. For a Roth IRA, MAGI adds back the same deductions, but also subtracts Roth conversions.