Spirit Rider wrote: ↑Fri Aug 09, 2019 9:58 am
miamivice wrote: ↑Fri Aug 09, 2019 9:47 am
A backdoor Roth is superior to a taxable if a taxable is to be used at retirement. However, if one is saving in a taxable for pre-retirement expenses, it would not be purposeful to put them in a backdoor roth.
You are aware that Roth IRA contributions can be withdrawn tax and penalty free at any age and earnings are fully qualified at age 59 1/2 if >= 5 years after the first year of contributions. Backdoor Roths are IDEALLY suited for early retirement when you might need reduced AGI/MAGIs.
It most definitely would be advantageous to put them in a Backdoor Roth even if targeted for early retirement. This is especially true if you expect to make more taxable investments later. Backdoor Roths are a perishable opportunity each year. You can't make up later like you can with taxable.
Yes, but I said pre-retirement, not early retirement.
For example, I spend $350,000 of taxable to buy some timberland last year. While in theory I could use Roth IRA money to buy the land, in practice it is difficult and I wouldn't want to do that. Since I needed to spend both contributions and earnings to buy the land, I couldn't just have withdrawn contributions from a Roth IRA to do that.
Your point about optimizing early retirement is well taken. I haven't really thought much about our retirement plan yet. I would like to retire at 55, spouse would like to retire at 65 (we're the same age). Will have to put more thought into that when the time comes.
The rest of our taxable I plan to use to build a house. Not sure what age we will be, partially depends on how quickly we can save. Maybe 42, maybe 47. Again, taxable for us might be used for pre-retirement expenses that we could not otherwise fund.
With all of that said, I think we're fine for retirement without the backdoor Roth. We'll figure out the details later.