azanon wrote: ↑
Fri May 18, 2018 12:22 pm
KlangFool wrote: ↑
Fri May 18, 2018 10:28 am
azanon wrote: ↑
Fri May 18, 2018 9:15 am
I haven't had a chance to read the entire thread yet, but I would think the really wise folks are going Roth because it provides for the most room for the tax-sheltered money. Specifically, there is no doubt at all that 18,500 in a Roth is worth more than 18,500 in a traditional.
Philosophically, at 22% tax bracket, putting money into Roth 401K is not good for tax diversification. At that income level, the IRAs will be Roth IRAs. Putting money into Roth 401K causes the person to overload on Roth space. Putting money into Trad. 401K and put the tax savings into Roth IRAs and the taxable account provide maximum tax diversification.
I have money in all 4 buckets including HSA. I have maximum flexibility to tax manage my withdrawal to face any future tax systems.
Klang - just wanted to acknowledge you're making good counterarguments, and to that, I would just point back to my original post in this thread which said or suggested that I wrestled with the choice for quite a long time before making it myself.
While I said above I'm 22% tax bracket today, I also said I expect to have a ~ 35K/year pension and 2 social securities (probably combined good for another 30K). In short, those 0 tax and low tax brackets will be filled by that 60K. So I'm going to completely fill up the 0% bracket, and almost fill up the 12% bracket if they are the same when I retire vs. today, and the next bracket is the one I'm in now. Also, I'm already stuck with a good chuck of traditional IRA money anyway on top of that because the TSP didn't add a Roth option until just a few years ago.
You may or may not be right in your assumption. But, at the minimum, you should be consistent with your assumptions.
If you assume that the law will not change, then, you will have to assume that the standard deduction and the tax brackets will be adjusted upward by annual inflation.
<<So I'm going to completely fill up the 0% bracket, and almost fill up the 12% bracket if they are the same when I retire vs. today,>>
1) It will not if the law stays the same. At the minimum, you should assume 2% to 3% inflation rate and adjust the standard deduction and tax bracket upward accordingly.
2) If you assume that the tax bracket stays the same, then, all bets are off. You are assuming that the tax law will change. Then, you can do any kind of assumptions to prove that you are right.
Conversely, if you assume 2% to 3% inflation, how could pay taxes now make any sense? Depending on the time period, even if you pay more taxes later, you still win.
Please be consistent. And, that was my only point regarding your situation.