Should I max out Roth or Traditional IRA for stub year? Forum

[Anonymous User]

Anon because identifying info in post history.

I am currently a stub year. My 2020 income will come out to something in the low-40s. Does anyone have advice as to whether I should max out a traditional IRA or Roth IRA for 2020 ? My thinking is to go with traditional. I think its worth it to reduce my taxable income and get back an additional thousand or so dollars in my tax refund. On the other hand, this will be the last year for a while that I will be applicable for a front-door Roth IRA.

My plan for 2021 is to max out my 401k and contribute $6,000 to a backdoor Roth. Will going with a traditional IRA for 2020 hinder my ability to backdoor a Roth in 2021?

As an aside, does anyone know whether I can take both the student loan interest deduction and the standard deduction? Or will I have to itemize if I want to take advantage of the student loan interest deduction.

Thanks for any insight.

[Anonymous User]

Probably go with Roth this year as it is somewhat likely this is the least annual taxable income you will have in your life. If you are really in need of $1k cash this year, maybe go with traditional (or neither).

2021 and thereafter in biglaw, definitely traditional + backdoor Roth

Going traditional 2020 will not hinder ability to backdoor Roth 2021

Believe you can take student loan interest and standard deduction. Also look into lifelong learning tax credit since you paid tuition this year and your income is low.

[Cloture19]

Going traditional 2020 will not hinder ability to backdoor Roth 2021

But if OP goes traditional IRA in 2020, won't he have to pay taxes on the amount in the traditional IRA when he does the Roth backdoor in 2021? See https://www.irs.gov/retirement-plans/ro ... ment-plans. I am researching this as well though, so might be wrong!

[Anonymous User]

Going traditional 2020 will not hinder ability to backdoor Roth 2021

But if OP goes traditional IRA in 2020, won't he have to pay taxes on the amount in the traditional IRA when he does the Roth backdoor in 2021? See https://www.irs.gov/retirement-plans/ro ... ment-plans. I am researching this as well though, so might be wrong!

Only if he uses the funds from the 2020 traditional ira to fund the backdoor roth IRA. Open up a separate traditional IRA in 2021, put 6k after tax dollars in the account and roll it over into a backdoor roth