You are not my accountant, I am not your client, blah, blah, blah. etc. etc.
I’m doing my taxes and trying to decide if opening an IRA to reduce my taxes is worth it. Here’s some background:
60 yrs old
Will retire in the next couple of years
Income in low 6 figures (but low enough to qualify for an IRA contribution)
Already have significant money in retirement accounts.
Have the money to contribute to an IRA this year.
Marginal tax rate: 25%
I’m trying to figure out if this is worth it. Here’s how I understand the situation, but please correct me if I’m wrong. I contribute after-tax money to the IRA - say $6500. This gives me a deduction on my tax form of $6500 off of my AGI. This will save me, at 25% tax rate, $1625 on my Federal taxes.
When I go to withdraw the money, however, the full amount I take out will be taxed as ordinary income. During the time it is in the IRA, however, it grows tax free.
Do I have all of this right?
Does this sound like a smart thing to do?
What would you do in my situation?
Are there any factors I’m not considering?