403B, Roth IRA or backdoor Roth?

[platter]

I'm not sure I'm grasping everything about the above options.  What is the best option for retirement contribution & minimizing taxes  in my situation described below:

Married and we file jointly

Projected 2017 gross income will be 175 K (but could potentially be > 186K depending on whether spouse gets a job-thereby making us get phased out of ROTH)

Projected 2018 gross income will be 80-95K (going back for more training x 3 years)

For the year 2017, if I have $5500 spare income to contribute to a retirement account, which option is the best? If I create a regular IRA and contribute $5500 in December 2017 and plan on converting to ROTH IRA within 60 days in Jan/February 2018 (to avoid penalty beyond regular income tax), what will my tax rate be? Will it be based on 2017 income or 2018 income which is significantly lower and puts us in a lower bracket?

Its quite possible I have understood it all wrong. Please help.

[Dreamgiver]

You have until tax day in 2018 to decide whether that $5500 contribution applies to 2017 or 2018. After tax day you can only apply it to 2018. If I were you, I'd do one for each year. I am not sure what penalty you are referring to. As long as the IRA contribution was post-tax, there is no penalty rolling it over to a Roth IRA. If I were you, for 2017 I'd contribute $5500 to a TIRA now and backdoor into a Roth (as long as you do not have an existing IRA with a balance now). Next year, just do a straight Roth contribution. If you are asking if you can make the 2017 contribution at the beginning on 2018 in order to pay taxes in a lower bracket, the answer is no, it does not work that way.

[platter]

Ok understood the TIRA to Roth part. Thank you!

For 2017: Between Roth vs. 403B, which is better if I expect to be in the same or lower tax bracket at retirement (175K yearly or less)?

Or should I just go for Roth/TIRA to Roth option since my contribution amount can be withdrawn without penalty if I need cash during the next relatively low income years? I should note that I already have a 6 mt emergency fund and will be debt free before upcoming training but family obligations may come up.

For the training years: If I'm able to contribute 15K to retirement annually during the training years, should I put 5500 in Roth and rest in 403B or everything in 403B?

[jfoxcpacfp]

I second Dreamgiver's suggestions, except I'm not sure what you mean by:

Dreamgiver wrote:

If you are asking if you can make the 2017 contribution at the beginning on 2018 in order to pay taxes in a lower bracket, the answer is no, it does not work that way.

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platter can contribute for 2017 at the beginning of 2018, but there is no deduction, hence it would not reduce his/her income resulting in paying taxes in a lower bracket. Or did you mean something else entirely?

I'm also not sure what penalty the OP is referring to - could you tell us more about what you've heard?

[Dreamgiver]

jfoxcpacfp wrote:

I second Dreamgiver‘s suggestions, except I’m not sure what you mean by:

Dreamgiver wrote:

If you are asking if you can make the 2017 contribution at the beginning on 2018 in order to pay taxes in a lower bracket, the answer is no, it does not work that way. 

Click to expand…

platter can contribute for 2017 at the beginning of 2018, but there is no deduction, hence it would not reduce his/her income resulting in paying taxes in a lower bracket. Or did you mean something else entirely?

I’m also not sure what penalty the OP is referring to – could you tell us more about what you’ve heard?

Click to expand...

What you wrote is what I meant.

[Dreamgiver]

I personally would do $5500 RIRA every year and as much Roth contribution into the 403b as you are able after that.

[jfoxcpacfp]

Dreamgiver wrote:

What you wrote is what I meant.

Click to expand...

oh, cool 

[platter]

The penalty I'm referring to is when you don't roll over to Roth within 60 days and have to pay 10% early deduction in addition to income tax

What does Roth contribution to 403B mean?

[Dreamgiver]

platter wrote:

The penalty I’m referring to is when you don’t roll over to Roth within 60 days and have to pay 10% early deduction in addition to income tax

What does Roth contribution to 403B mean?

Click to expand...

I am not aware of such a penalty. I think you are getting confused with the 60-day rule for IRA and retirement plan distributions. That rule does not apply to an IRA to Roth IRA conversion.

 

You can contribute to a 403b with after tax money (i.e., you make "Roth" contributions into it) instead of tax deferred money. That is all I did as a resident.

[DMFA]

At that income, you should be putting more than just $5,500 into retirement. Are you not using your 403(b) at all? Does your 403(b) have a Roth option?

[platter]

By the end of the year, between my 403B and Roth IRA, I will have contributed 13,500 for 2017. I'm in my gap year between residency and fellowsy, currently working as an attending. Lived frugally, paid off all 100K of student loans, 20K of parents debt and managed to grow e fund to a 6 mt value just in this year. Not too bad! My goal for the next 3 years is to save 20 K yearly towards retirement- should I push it? Spouse is a spender and we may try to have a kid in a year so it will be hard.

Also what is the best way to handle current 403B from residency? It's a low cost acct. leave it as it is? There's also a 401A from work with some money - any tips?

[DMFA]

Those other retirement accounts are probably fine where they're at. There's no major need to rollover the account if the holdings are good. If you have any self-employed income like most moonlighting, you can start an individual 401(k) and move it there.

$20,000 sounds like a pretty decent goal. A general recommendation is 20-25% of gross income, which would put you right there. However, since you have no debt and good cash reserves, you might even consider maxing out the 403(b) and Roth IRA ($23,500).

Can you - or do you want to - moonlight during fellowship and make some extra, or is it not worth the extra time lost with your family?