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  • Dicast
    replied




    Correct me if I am wrong, but the Backdoor Roth IRA won’t provide me with any current tax benefits for 2016’s taxes, right? Now that I have a higher salary since being an attending (since August 2016), should I be looking for options to decrease my tax return? I am married, wife is not working at the time, rent and have an ORP through my employer.
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    Your Roth IRA won't help your taxes until it is time to start making withdrawals.  Maxing your ORP or any pretax investment vehicle is the easiest way to avoid paying taxes this year.  I think many people look around for magic fixes for deductions and the reality is that there aren't many if you don't have big changes going on in life.  Anytime you relocate, buy a house, or have some other major expense/life change it is worth looking for a deduction.  If you have a poorly performing stock or fund that could be sold for a loss, you could get a little more out of it.

    If your question really was "How do I decrease my tax return?", then I'd say you are paying in too much taxes and need to adjust withholding.  Otherwise I don't know why you'd want to decrease your tax return through any other method.

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  • manuelmas
    replied
    Correct me if I am wrong, but the Backdoor Roth IRA won't provide me with any current tax benefits for 2016's taxes, right? Now that I have a higher salary since being an attending (since August 2016), should I be looking for options to decrease my tax return? I am married, wife is not working at the time, rent and have an ORP through my employer.

    Leave a comment:


  • PhysicianOnFIRE
    replied










    I would open a taxable account at Vanguard.
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    I second that emotion.

    First, make sure you’ve gotten all the tax-advantaged investments available to you. HSA if it makes sense for your family. Backdoor Roth. Then start buying a simple total stock market index fund. Create a simple IPS to guide further investments.

    Strong work, by the way. Meeting the challenge to Live on Half!
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    I havent done the Backdoor Roth. Have read a little about it. So, if I have a current Roth IRA, would that be the first thing you would do then?
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    Yes. Do that before starting a taxable account. Make sure you have no traditional, tax-deferred IRA money in your name first. Otherwise, the pro-rata rule will wreak havoc on your plans. More from WCI here.

    Leave a comment:


  • DMFA
    replied










    I would open a taxable account at Vanguard.
    Click to expand…


    I second that emotion.

    First, make sure you’ve gotten all the tax-advantaged investments available to you. HSA if it makes sense for your family. Backdoor Roth. Then start buying a simple total stock market index fund. Create a simple IPS to guide further investments.

    Strong work, by the way. Meeting the challenge to Live on Half!
    Click to expand…


    I havent done the Backdoor Roth. Have read a little about it. So, if I have a current Roth IRA, would that be the first thing you would do then?
    Click to expand...


     

    1. Have $0 in all non-Roth IRAs, (traditional IRAs, SEP-IRAs, and SIMPLE-IRAs)

    2. Start a traditional IRA

    3. Contribute $5,500 to the traditional IRA (don't claim it as a tax deduction) and keep it in brokerage cash or a minimal-interest money market acct

    4. Convert that $5,500 into your Roth IRA a few days later

    5. File Form 8606 at tax time (tax due should be zero)


    Your currently existing Roth IRA is not affected by the "backdoor" contribution...well, I guess, other than it still gaining $5,500 each year.

    Leave a comment:


  • manuelmas
    replied







    I would open a taxable account at Vanguard.
    Click to expand…


    I second that emotion.

    First, make sure you’ve gotten all the tax-advantaged investments available to you. HSA if it makes sense for your family. Backdoor Roth. Then start buying a simple total stock market index fund. Create a simple IPS to guide further investments.

    Strong work, by the way. Meeting the challenge to Live on Half!
    Click to expand...


    I havent done the Backdoor Roth. Have read a little about it. So, if I have a current Roth IRA, would that be the first thing you would do then?

    Leave a comment:


  • PhysicianOnFIRE
    replied




    I would open a taxable account at Vanguard.
    Click to expand...


    I second that emotion.

    First, make sure you've gotten all the tax-advantaged investments available to you. HSA if it makes sense for your family. Backdoor Roth. Then start buying a simple total stock market index fund. Create a simple IPS to guide further investments.

    Strong work, by the way. Meeting the challenge to Live on Half!

    Leave a comment:


  • Hatton
    replied
    I would open a taxable account at Vanguard.

    Leave a comment:


  • manuelmas
    replied
    Greetings:

    Everything is going well after my initial thread post a while back. I have been saving 50% of my paycheck, 20% going to Retirement and the rest going into Down Payment savings and other tidbits. Of the 20%, 6% is kept by Employer for Retirement Plan (and matched by 8%). The additional 14% is right now in my bank's Savings account.  I have a Roth IRA opened last year before starting as an attending, plus savings in two index funds. Where should I put this additional 14% for Retirement currently in my Saving's account?

     
    Thank you,

    Manuel

    Leave a comment:


  • DMFA
    replied
    The $18,000 to 403(b) applies only to elective deferrals which come out of your salary and applies to all *combined* 403(b), 401(k), and SIMPLE accounts you have.  457 accounts are not included in that.

    You can still have other contributions to the 403(b) (such as employer match) up to a total of $53,000 *per employer*.  If the employer money isn't going into your 403(b) - I don't know if ORP Does - then it's not subject to that limit.

    IRS Publication 571 for reference, for your infinite reading pleasure (gag): https://www.irs.gov/pub/irs-pdf/p571.pdf

    Leave a comment:


  • manuelmas
    replied




    @dicast Yep – my understanding as well. ORP doesn’t count towards 403b limit.
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    It doesn't from what I have read.

    Leave a comment:


  • tex
    replied

    @Dicast Yep - my understanding as well. ORP doesn't count towards 403b limit.

    Leave a comment:


  • Dicast
    replied
    Tex-

    I'm starting to see that the ORP while a 403(b) does not count against personal contributions limits as it is a mandatory, no opt out provision of employment.  I think the IRS refers to these as "pick-up" contributions.  I have yet to find the specific IRS release stating this in regards to individual contributions but it seems to me you get to make the full $18,000 to the 403(b) contribution in addition to the mandatory amounts.  My wife's contract is for $180k so that would get her to a 35% savings rate if it is true.

    Leave a comment:


  • wideopenspaces
    replied
    Check your messages :-)

    Leave a comment:


  • tex
    replied
    Chiming in as a fellow Texan:

    Public school teachers and employees of state edu system make a one time election for TRS pension or ORP (401k like, with state match).

    The wife's employer offers TRS/ORP, 403b without match, 457b and then extra cherry on top employer-contribution accounts for salaries above X amount, etc. OP should clarify with HR - they may have more tax deferred space than they think.

    Just goes to show us W2 types would be wise to shop around - they are still some generous benefits packages out there. My offer from a national for profit employer was not competitive with an "academic-ish" clinical appointment at a big institution.

    Leave a comment:


  • manuelmas
    replied










    If it helps to have more information on my new role, my base gross annual salary is 190k. I have a stay-at-home wife at the moment, no kids. I am renting a 1800 apartment. Don’t have a car loan. Have the 9k combined education loans from my wife with interests ranging 4-6%.

    You spoke about both Roth 403B and traditional 403B. You recommend to try and max both of them? What about saving for down-payment? What strategy should I use?
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    WCI gave you an answer to this, but I’m not sure he had read through all of the messages. Student loans of $9k at 4 – 6% should be knocked out first. Since you have decent Fidelity options through your ORP and it has a match where (I presume) the 403b doesn’t, it makes more sense (based on the little I know at this point) to focus on the ORP & get maximum match because you are earning under the threshold (at least $245k) and will get an 1.85% “over-match” – that’s incredible. I really can’t go beyond this recommendation at this point, however.
    Click to expand…


    I’m pretty sure the ORP is the 403(b).  You have a mandatory contribution and match in this program.  There is additional room for voluntary contributions in the 403(b) up to the yearly maximum of $18,000 (pre-tax) and then they allow after tax contributions (not sure I would do this).  Then you have a governmental 457(b) option as well (with match in 403b and maxing both 403b and 457 you will be at about 25% savings rate).  They should have given you an updated benefits page that gives the most simple explanation on the second page.

    Please note that all of your matching funds are held in a money market account until you are vested at 1 year 1 day.  You will have to manually direct this money into investments after that point and additionally make sure your future matching is set up to be placed into the funds of your choice.  If you fail to do this, your matching funds will continue to be placed the the money market account portion of the plan.

    //I’m helping my wife set this same stuff up tonight.  Same employer.  I think Fidelity is the obvious choice out of the available providers.
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    Do you have any idea of the withdrawal fees for ORP if after 1 year/1day I leave my job and go to another state?

     

    Manuel

    Leave a comment:

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