JBTX wrote: ↑
Mon Jan 01, 2018 5:39 pm
Under the 2017 bracket (and 2026 sunset) if you have around $100k income you are in 25% tax bracket. Two professional working spouses could easily get $50k to $60k in social security which means you only need to get 40k to 50k to get to $100k.
40-50k would give you $1 - 1.25 million at 4.0% withdrawal rate.
$1million plus in traditional savings is not an extraordinary amount for people in this forum.
Not to mention to be apples to apples you have to put traditional tax savings in a taxable account if you max out your retirement savings.
Not to mention the current social security tax can drive your marginal retirement rate even higher especially if you have 2 above average social security incomes. Even more so if you defer social security to 70.
So if I contribute to Roth in the mid or even high 20s and withdrawal in the mid or even low 20s that isn’t a terrible deal. Even if you lose a few points in tax bracket there is something to be said for not having to worry about taxes at all, not having to worry about RMDs and having the ability to pass to heirs tax free.
Now if you are extremely frugal and plan to live on 40-50k and plan to retire 10 years prior to social security, yes obviously traditional is better. If you have rate 30 or over, with or without state income tax traditional is more than likely better. But if you plan on needing approx $100k per year with well into 7 figures then Roth should give you roughly comparable results and a lot more flexibility.
As I’ve said I’m about 50% traditional and 40-45% Roth. Everybody should have enough traditional to fill out the lower brackets in retirement.
<< Under the 2017 bracket (and 2026 sunset) if you have around $100k income you are in 25% tax bracket. Two professional working spouses could easily get $50k to $60k in social security which means you only need to get 40k to 50k to get to $100k.
40-50k would give you $1 - 1.25 million at 4.0% withdrawal rate. >>
Please be very precise in your statement. Only $1 - $1.25 million in the tax-deferred account will generate 40-50K of taxable income.
1) For the Roth account, you generate zero taxable income at withdrawal. It is counted as zero for this purposes.
2) For the taxable account, you pay tax on your capital gain, distribution, dividend, and interest income. Aka, not the full amount of the taxable account.
<<$1million plus in traditional savings is not an extraordinary amount for people in this forum. >>
3) Yes and no. There are a fair amount of Boglehead folks with $1 million plus in investment asset. But, only a subset of them has $1 million plus in the tax-deferred accounts.
<<As I’ve said I’m about 50% traditional and 40-45% Roth. >>
4) The irony of your situation is that with more money in Roth, you can afford to put more money into the tax-deferred account. You may not have $1 million to $1.25 million in the tax-deferred account yet.
I am an example of why 100% into Trad. 401K and 100% into Roth IRA and the rest into the taxable account work very well.
A) I am at about $1.25 million now.
B) But, I fully expect to pay less tax when I am FI / Retire
i) I will retire before 62 years old. Aka, before collecting social security.
ii) Only 50% of my portfolio is in the tax-deferred account.
iii) 10% are in Roth IRA that does not count as income at tax time
iV) 40% are in the taxable account with maximum 50% gain. If I sell 100K in my taxable account, at worst, it will generate 50K of long-term capital gain.
v) My annual expense is 60K. I do not need to generate a lot of money to cover my annual expense. I do not need 100K of retirement income.