Roth IRAs versus Traditional IRAs and Living in New York 🗽

When I first started saving for retirement, outside of my state pension about ten years ago, I opened a Roth IRA and started to maximize it. I was fairly young, and my income was lower as I was not as far along on my career path. When you are younger, and you have 30 plus years for your investments to grow, it seemed like an appropriate way to save. The idear is pay payroll taxes now, pay zero state or federal taxes when you withdraw upon retirement with the Roth.

In most recent years my mind has changed, more into the camp of the traditional IRA. For one, I found myself taking an extended leave from state service, and with so went the more lucrative retirement program and deferred compensation, which you can’t contribute to as a non-state worker. With the state, I did the traditional IRA option with deferred comp and continued to maximize my Roth IRA on the side. My other employer offers a 401K, which I’ve been maximizing, but it’s maximum contribution rate is smaller then the state’s deferred comp plan, so to avoid my taxes going up significantly, I switched over to a traditional IRA option. I already get hit every year from investment income, even if it’s reinvested. Traditional IRAs, let you deduct all contributions immediately, lowering your taxable income but you have to pay taxes when you take money out as you retire.

Part of what made me change my mind from the Roth to the Traditional was I don’t plan to live in New York the whole rest of my life. While New York allows a decent standard deduction on something like $17k when you take retirement income, many other states don’t tax retirement income at all. It’s hard to know how much money I’ll need in retirement at my off-grid property, but even in low property-tax states, there are always expenses for a hobby farm — be it equipment, fuel, vehicles, livestock, feed, minerals, and groceries. Stuff gets used up, has to be replaced. Stuff you spend money on becomes poop, scrap metal or fire in the burn barrel. Tractors and implements are mad expensive. That’s life. But saving on taxes today, means I can invest more today, plus I am spending less money to subsidize the wasteful and abusive New York State government.