22 Mar Nearly 70 and still saving

Q. My wife and I were both born in 1948. I am working with a full contribution to a 401(k). My wife is retired. For 2016 and 2017, should we contribute to a Roth or a traditional IRA?
— Still saving

A. The best choice depends on the specifics of your situation, including your current and future tax brackets, but here are some items to consider.

A traditional IRA, depending on your income level, provides a tax break today because you contribute pre-tax dollars — contributions that lower your taxable income — into the account but when you take money out in retirement it’s taxable income, said Brian Power, a certified financial planner with Gateway Advisory, LLC in Westfield.

Then there’s the Roth IRA, which provides a tax break down the road.

You’d put after-tax dollars into Roth, so when you take the money out in retirement, you have tax-free withdrawals.

Power said a traditional IRA should be chosen if you are in a higher tax bracket now than you will be in retirement or once you stop working full-time.

A Roth IRA should be chosen if you are in a lower tax bracket now than you will be in retirement or once you stop working full-time, he said.

Of course it’s not that simple.

“Because of your age, you should also pay attention the another benefit the Roth IRA has,” Power said. “There are no mandatory required withdrawals that have to be made like in a traditional IRA starting at age 70 ½.”

Because of this, Power said, the Roth IRA seems to make the most sense for you because you’ll both be required to start withdrawing from a traditional IRA in a few years. You won’t be giving your current contributions much of a chance to benefit from the tax deferral of the traditional IRA.

This, of course, all assumes you’re eligible to make the Roth IRA contributions.

“If you file as married filing joint, your income must be less than $184,000 to contribute up to the $6,500 per person limit,” Power said. “If your income falls between $184,000 and $194,000 you cannot contribute up to the limit. Your contribution is reduced.”

If your income exceeds $193,000 you cannot contribute to a Roth IRA at all, he said.

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This post was first published in March 2017.