Financial tax deferred vehicles above 401K and not income limited

My wife and I contribute the max to our 401K accounts and max out our Roth's. Either this year or next year we will hit the limit of 160K AGI. A couple of questions...

1. Are you penalized if you hit the limit and contribute to your Roth IRA the first year. The reason I ask is I do not know what capital gains will be this year and we both have the possibility of bonus's which you can't count on and we have already contributed to this year.

2. What other tax deferral vehicles are there for high income people???

Yet another marriage penality, if we were single we could make 190K combined without penality.

There may be something you can do with a Family Limited Parnership and Gifts among family members.

EDIT:
Gift extra money that would go to your estate in the future to your children in the limited family partnership. The money is taxed at your children's bracket, but you remain in full control of it.

I forgot to add that we have no kids nor plan to have kids and are 29 years old. For the annuities, what are the overall returns on them? Are they comparible to stocks? I have seen several articles that recommend against them but I really haven't investigatd them

dmlavigne1 said: I forgot to add that we have no kids nor plan to have kids and are 29 years old. For the annuities, what are the overall returns on them? Are they comparible to stocks? I have seen several articles that recommend against them but I really haven't investigatd them

Annuties come in various types. Typically they are high cost products (those that sell them can make up to 10% commission) but can make sense for some. There are guaranteed annuities that are tied to the S&P 500 that give up plenty of upside potential with essentially no downside risk. The cost however, is that most of these guaranteed annuities only participate up to a percentage gain in the market. Very often it is capped at 10% or 50% of the gain over a certain percentage. An insurance salesman would be more than happy to point out all of the different products you can choose from.

psychtobe said:
the bottom line: you are gaining tax-deferred growth but giving away favorable taxation on LT cap gains and dividends. you don't know what future tax rates will be, but a good bet would be higher.

Second that..
At 29 and already making 95k avg, you seem to have a lot of growth potential. Add any money you will inherit. It is quite likely that your retirement bracket will be higher than your current bracket even if tax rates don't go up.
And it is likely that tax rates in 40 years from now will be higher than today.
So I would sit down and calculate if these tax-deferred investments are really worth it.

This probably does not apply to you OP since you said 401k, but I know a lot of people that have a 403b and 457 available do not realize you can contribute the max ($15,000 this year) to each one.

brokestudent said: This probably does not apply to you OP since you said 401k, but I know a lot of people that have a 403b and 457 available do not realize you can contribute the max ($15,000 this year) to each one.

Yeah, unfortunately we are corporate droans and not self employed.

isn't a traditional ira income limit for a couple 75K total????

OP said this wouldn't be helpful because he has no clildren, but others have expressed interest in the family limited partnership. Here is an elaboration:

If family assets are held in the form of a limited partnership, it will be possible to obtain certain income tax savings in addition to the asset protection benefits. Tax savings can be realized by spreading income from high tax bracket parents to lower tax bracket children and grandchildren who are fourteen years or older.

A father has taxable income from various investments of approximately $200,000, consisting of interest and dividends from bonds, stocks, and trust deeds that he owned. He was in a 32 percent maximum tax bracket and paid taxes of approximately $64,000 per year on this income. As part of an overall business plan that he established, all of his assets were transferred into a Family Limited Partnership and a total of seven children and grandchildren were brought in as limited partners of the partnership. Under the partnership agreement, the children and grandchildren were taxable on $100,000 of the $200,000 in income generated by the partnership. Each of these children was in a maximum tax bracket of 15 percent, and thus, the total taxes owed on this $100,000 of investment income was reduced from $32,000 to $15,000. This produced a savings of $17,000 in overall family income taxes. Under the partnership agreement it was not required that the $100,000 actually be distributed to the children. In fact, the parents as general partners retained all of this amount except for what was needed to pay the taxes on the children’s share of partnership income. The parents thereby reduced their annual income taxes by shifting a substantial amount of income to their children.

Not only is the FLP good for saving on income taxes, but it's a great vehicle for asset protection from both creditors and lawsuits.

EDIT:
Grammar

Any nondeductible contributions to a traditional IRA are not taxed at distribution or conversion.

With the 2010 conversion only earnings are taxed at your marginal rate.

This article explains what fanman is talking about.

dmlavigne1 said:
So if I have gains on the money it counts as short term gains/regular income. I rebalanced the funds this year when I made the contributions to try to diversify into different areas of the market, some of the funds are way up and several are slightly down. My question is if I say that a fund that lost money is my contribution (granted we are only talking about a couple hundred bucks) do I get to deduct the losses IE only declare 4K-the lossses on teh taxes? That would seem fair.

Good try but no.
When you ask the brokerage to withdraw the contribution, they will calculate the gains and send the check to you.
Your gains will be the amount on the check minus your contribution.

USrules said: RedCelicaGT said:
If family assets are held in the form of a limited partnership, it will be possible to obtain certain income tax savings in addition to the asset protection benefits....
Not only is the FLP good for saving on income taxes, but it's a great vehicle for asset protection from both creditors and lawsuits.

You can give credit to the source you quoted this from.

Plagiarism. Someone's now upset that they were caught posting someone else's work as if it was his/her own.

bliab said: Any nondeductible contributions to a traditional IRA are not taxed at distribution or conversion.

With the 2010 conversion only earnings are taxed at your marginal rate.

This article explains what fanman is talking about.


Very interesting.... Ok a followup to this....

1. If you have a traditional IRA already from a 401K rollover. I assume that you can convert that also.
2. The taxes paid can they come from the IRA itself or does that trigger a penality?
3. Do you have to convert the whole thing or can you convert part of it?
4. Is the conversion an ongoing thing after 2010 or a one time deal in 2010 IE do you always get 2 years to pay the tax.
5. Can this be done every year? If so I would just open a traditional ira yearly with 4K and convert it.