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Author: dhartman Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75384  
Subject: Simple Investing/Retirement question Date: 4/1/2011 7:31 PM
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I have what I thought would be a simple question and/or confirmation of my understanding.
My family (wife and I) are considered high income (not complaining) and here is the summary of our yearly investing approaches.
* both of us max out our 401K and have some left over
* We have a mortgage, but no other debt
* We are probably in the higher (if not highest) income bracket
* We have some IRA's from previous rollovers and from our younger days
* We are both just under 40
* With our 401K's maxed we still have about 25+K each year available to invest

My simple question:
* Why wouldn't we still fund our traditional IRA's each year with the max amount allowed (5K for each of us)? These are IRA accounts we have with Vanguard and so we can invest the $ however we want (except for trade types not allowed with IRA's).
My reasoning is that even though we can't deduct the 5K, we already "paid" taxes on it and so if I can at least get it into a tax deffered account I wouldn't have to pay tax on the earnings year in year out going forward.
Also, I know there are calculators out there about whether or not to convert a IRA to a Roth IRA. My simple thinking would be do it (if I can pay the taxes on it) as everything I gain on the money for the next 20+ years will never be taxed. Even though it could be a hefty tax bill, it would seem that paying the tax once (now) would be better. I know that if my tax bracket is lower in retirement than now, I might not pay AS MUCH in tax, but the difference between the amount I pay now vs the amount I pay later would be more than offset by the gains I would make on that "been taxed now and never taxed again money".

So, is there a reason that I A) wouldn't put something into the IRA every year even if I have already maxed out my 401K and B) Wouldn't convert what I have now and what I had every year from a traditional IRA to a Roth IRA?
In all of these cases this is money that I don't need or plan to touch until retirement.

Sorry for what is probably a question that has been asked many times, I just never felt I had a clear understanding as the math seems pretty straight forward to me (maybe I need to break out an excel spreadsheet and run some examples for myself).

Thanks,
Daver
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