Hello all,

I'm getting married next year and I started thinking about the tax implications.

Considering the fact that our change in filing status will increase our ability to contribute to retirement plans and decrease our tax burden, what should I do to take maximum advantage of this?

Here's my plan so far:

1) Turn my Roth IRA into a Spousal IRA and double my contributions (for two people instead of one).
2) Increase my Roth 401k contributions and discontinue my traditional 401k contributions for the time being (we'll be squarely in the 15% bracket, and I don't think it'll get any better than that).

This is the wild idea: 3) Roll my traditional 401k into my Roth 401k and pay the taxes on it.

For idea 3, before getting married, I used my traditional 401k to avoid entry into the 25% tax bracket. Since I'll have plenty of wiggle room after getting married, I'll be able to convert my traditional 401k contributions to Roth contributions, and pay just 15% tax to do so. Is this correct? Someone please tell me I'm making sense there.

Why not just open a separate IRA for the Spouse? I've never seen a single IRA combined for two people.

That's a pretty good idea. Like you said, you'll likely never be in a lower bracket, so take advantage of that.


I like this idea too. Note, that the conversion will increase your income that year for the amount converted, so it may push you into a higher bracket. Also, be sure you have enough money OUTSIDE of the 401(k) to pay the tax on the conversion. If you use money from within the 401(k) to pay the tax, that is considered a distribution and will be subject to early withdraw penalties.*

*That's at least how it works for TIRA to Roth IRA conversions, I've never looked specifically at 401(k) to Roth 401(k) conversions, but I assume the rules are the same.

Thanks bpgui. I think you're right, a separate Roth IRA is probably the best idea.

As for the Roth conversion, assuming the brackets remain the same for married couples earning less than 90k/yr combined, we should have no problem staying under that even if I completely close out the 401k. Also no problem paying the tax on that money out of pocket. I figure the since the only reason I am contributing to my traditional 401k is to stay below the 25% bracket, being able to pay just 15% on the conversion is a deal that's too good to be true and probably will never come again.

There is no such thing as a joint IRA. The I stands for Individual.

Other than that your plan sounds pretty good.

Though, do you expect your income to go up significantly in the future? Under current tax laws it does, in fact, get better than 15%. The lowest tax bracket is 0% (deductions and exemptions) and the second lowest bracket is 10%, though the latter could easily change.

Sure... but I'd practically have to lose my job for my taxes to go down?

Sooner or later you will lose your job. It's called retirement. At that point you'll want to have some tax-deferred money to withdraw, and pay zero taxes on it. Just saying, don't put all your eggs in the Roth basket.

If you expect your household income to go up, and get you into the 25% bracket between now and retirement, then you could go all Roth now and contribute to tax deferred savings later.

I kind of like that idea. By the time Roths were created my income was already too high to contribute (short of playing conversion games). And I'm not so sure about them in many cases. There is probably a scenario that makes them make sense but right now I'd be contributing with money that I already paid taxes on at relatively high rates just to escape taxes on withdrawals at lower rates later.

But in your scenario where a Roth is maxed out while in a low bracket, that makes a lot more sense. Then the earnings grow without taxes during you high-bracket years. This kind of makes me want to invent a time machine...