BHers, what is your Roth IRA %?

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letsgobobby
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Re: BHers, what is your Roth IRA %?

Post by letsgobobby » Wed Jan 09, 2019 6:05 pm

livesoft wrote:
Wed Jan 09, 2019 4:07 pm
celia wrote:
Wed Jan 09, 2019 3:56 pm
livesoft wrote:There used to be income limits on that, right?
I'm not sure. That would have been before I was interested in converting, if it used to be. Obviously you couldn't convert to Roth before Roths even existed.
I looked it up and found this in wikipedia:
Prior to 2010, two circumstances prohibited conversions: Modified Adjusted Gross Income exceeding $100,000 or the participant's tax filing status is Married Filing Separately. These limitations were removed as part of the Tax Increase Prevention and Reconciliation Act of 2005.
I bet you ddn’t really have to look that up, now did you... :P

columbia
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Re: BHers, what is your Roth IRA %?

Post by columbia » Wed Jan 09, 2019 6:24 pm

About 45%.

I believe that anyone expecting to eventually have and invest money from an inherited IRA should have a Roth: never pay another dime of taxes (on the amount you can eventually place in a Roth, after legally required distribution).

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calmaniac
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Re: BHers, what is your Roth IRA %?

Post by calmaniac » Wed Jan 09, 2019 6:31 pm

infotrader wrote:
Wed Jan 09, 2019 1:17 pm
My question is: is there an ideal % for the tax deferred balance when RMD starts in 10 years?
P.S. we don't plan to use the money for retirement, since we have pensions, etc. to cover our living costs and taxes.
infotrader, what is your goal in having a Roth IRA?

You note you don't plan to use the Roth money for retirement. So, how do you expect to use it? Charity? Inheritance?

I would think different goals in that regard would dictate different uses for the Roth IRA.

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whodidntante
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Re: BHers, what is your Roth IRA %?

Post by whodidntante » Wed Jan 09, 2019 6:51 pm

15% including my HSA and this year's mega backdoor Roth experiment.

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infotrader
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Re: BHers, what is your Roth IRA %?

Post by infotrader » Wed Jan 09, 2019 7:21 pm

calmaniac wrote:
Wed Jan 09, 2019 6:31 pm
infotrader wrote:
Wed Jan 09, 2019 1:17 pm
My question is: is there an ideal % for the tax deferred balance when RMD starts in 10 years?
P.S. we don't plan to use the money for retirement, since we have pensions, etc. to cover our living costs and taxes.
infotrader, what is your goal in having a Roth IRA?

You note you don't plan to use the Roth money for retirement. So, how do you expect to use it? Charity? Inheritance?

I would think different goals in that regard would dictate different uses for the Roth IRA.
Inheritance, I guess.
In my circumstance, due to tax consequences, Roth money is the best money, and tax deferred is a time bomb. However, I think there is some merit to keep some around to deal with unpredictable tax situations in future.

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chickadee
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Re: BHers, what is your Roth IRA %?

Post by chickadee » Wed Jan 09, 2019 7:31 pm

What was awesome was being an early believer in Roth IRAs and converting your Trad IRA to a Roth when it began in 1998. You could spread the tax over 4 years! So fast forward to the dot com bust, and you were still paying taxes on your Roth conversion while your equities were in the toilet and your Roth IRA balance was way way way down! Super super fun!

NoHeat
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Re: BHers, what is your Roth IRA %?

Post by NoHeat » Wed Jan 09, 2019 7:32 pm

10% Roth
39% Tax deferred retirement
2% 529 college
49% Taxable

I'm very thankful for Roth conversions, including the backdoor kind. I'll keep doing them before retirement (about six years out) to boost the Roth percentage, as we'll get more distributions than we need from RMDs and the taxable account, and our tax bracket is not likely to go down.

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calmaniac
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Re: BHers, what is your Roth IRA %?

Post by calmaniac » Wed Jan 09, 2019 7:41 pm

infotrader wrote:
Wed Jan 09, 2019 7:21 pm
Inheritance, I guess.
One thought, if at some point you have grandchildren of sufficient age (≥18y?) for whom you have a good sense will not blow the money, make them beneficiaries of some of that Roth account. Since their RMD will be based on their life expectancy, this allows the Roth to continue to grow tax free for years after your passing. Potentially, many more tax-free decades than with an older adult beneficiary.

Roth2

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Re: BHers, what is your Roth IRA %?

Post by DetroitRick » Wed Jan 09, 2019 8:01 pm

We're (me + spouse) at 19% Roth. 60% in Rollover IRA, 21% taxable.

Our original goal was to hit 30% Roth, 50% Rollover and 20% taxable, but ACA got in the way (modified adjusted gross income). Still tax-wise, between state and federal, this has worked out optimally for us so far. May still do some conversions and contributions to Roth (wife still working, me retired) but not sure yet if we'll get to 30%.

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Re: BHers, what is your Roth IRA %?

Post by sschoe2 » Wed Jan 09, 2019 8:05 pm

100% Vanguard Total Stock Market
it adjusts my 401k which is 100% Vanguard Target 2045 (best of limited options) I am less bullish on international than Vanguard which allocates 40% of stocks to international.

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Re: BHers, what is your Roth IRA %?

Post by grabiner » Wed Jan 09, 2019 8:50 pm

The ideal traditional/Roth split in retirement is on the boundary of the brackets which has your current marginal tax rate between the two (or a bit lower than your current marginal tax rate if you max out). If you aren't maxing out your retirement accounts, and you are on that boundary, then putting more money in Roth accounts now costs you more in taxes than it saves you, because it is at the lower tax bracket. If you are maxing out, and are a long way from retirement paying 28% tax now (in a Roth) to avoid 25% tax later is a small net gain, because you effectively tax-defer more money.

My own current allocation is 38% tax-free (Roth IRA, Roth employer plan, and HSA), 35% tax-deferred (traditional employer plans), 44% taxable, -7% mortgage (which I count as a taxable negative bond). Note that I tax-adjust all these numbers; I expect to retire at a 31% marginal tax rate (combined federal and state; it will be 30% if the current tax cuts are made permanent as I won't be able to deduct my state income tax), so I count $100 in the Roth as equivalent to $69 in the traditional account.
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bhsince87
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Re: BHers, what is your Roth IRA %?

Post by bhsince87 » Wed Jan 09, 2019 9:30 pm

About 1.5%. Will be doing conversions starting next year.
Retirement: When you reach a point where you have enough. Or when you've had enough.

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infotrader
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Re: BHers, what is your Roth IRA %?

Post by infotrader » Wed Jan 09, 2019 9:42 pm

calmaniac wrote:
Wed Jan 09, 2019 7:41 pm
infotrader wrote:
Wed Jan 09, 2019 7:21 pm
Inheritance, I guess.
One thought, if at some point you have grandchildren of sufficient age (≥18y?) for whom you have a good sense will not blow the money, make them beneficiaries of some of that Roth account. Since their RMD will be based on their life expectancy, this allows the Roth to continue to grow tax free for years after your passing. Potentially, many more tax-free decades than with an older adult beneficiary.

Roth2
Never thought about that. Great idea.

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whodidntante
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Re: BHers, what is your Roth IRA %?

Post by whodidntante » Wed Jan 09, 2019 9:49 pm

chickadee wrote:
Wed Jan 09, 2019 7:31 pm
What was awesome was being an early believer in Roth IRAs and converting your Trad IRA to a Roth when it began in 1998. You could spread the tax over 4 years! So fast forward to the dot com bust, and you were still paying taxes on your Roth conversion while your equities were in the toilet and your Roth IRA balance was way way way down! Super super fun!
That does sound fun!

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sergeant
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Re: BHers, what is your Roth IRA %?

Post by sergeant » Wed Jan 09, 2019 9:51 pm

infotrader wrote:
Wed Jan 09, 2019 2:41 pm
MathWizard wrote:
Wed Jan 09, 2019 2:27 pm
We are at about 20% of our portfolio in ROTH the rest in taxable
(not counting first tier EF in savings account), the same as you, as similar ages.

I'm surprised that you were able to get $600K in your ROTHs. Was some of this from ROTH 401K
or from ROTH conversions (or backdoor ROTH)?
You are right. We use the backdoor Roth approach.
WOW! That is an exceptional rate of return on those assets. Care to explain how you were able to achieve such results, on such a small amount of deposits in such a short time span? Is it possible you meant conversions not backdoor?

We have been doing backdoor since it became a possibility and some small conversions and have about half what you have in Roth. Roth 10%- Tax-deferred 50%- Taxable 40%
Last edited by sergeant on Wed Jan 09, 2019 9:56 pm, edited 1 time in total.
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MnD
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Re: BHers, what is your Roth IRA %?

Post by MnD » Wed Jan 09, 2019 9:53 pm

0%.
In the mid-1980's we had 401-K training (when our organization started offering one) that explained that deferring compensation and the taxes on it when you are working in a higher bracket and then spending that money when you are not working and in a lower tax bracket is financially advantageous. 30+ years later and just retired that's exactly the way it's worked out. Every dime of income I've deferred would have been taxed at the top bracket at the time which was 28%, 31% or higher (deferral avoiding triggering AMT). When spending, even if you apply other income to the lowest brackets first, it will be taxed at a blend of 12% and 22% and yet provide the same financial standard of living as when working and in much higher brackets.

Others here have provided specific examples of just how large a portfolio must grow to for RMD's to approach typical BH's marginal tax brackets when working. I'm not worried about that after running the actual specifics. I would encourage people to actually work the numbers to see what their individual risk of this is versus hand-waving about RMD's. Some of the worst advice I've ever received on this board in the past (which fortunately I didn't follow) includes making Roth conversions while working to the top of the 28% bracket, to blindly contribute to Roth just for "tax diversity" and to assume "marginal tax rates will certainly go up" when in fact they went down.

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dwickenh
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Re: BHers, what is your Roth IRA %?

Post by dwickenh » Wed Jan 09, 2019 10:21 pm

44% ira
49% taxable
7% Roth IRA.

Conversions slow now with ACA subsidies. I intend to end up at 25% ira, 25% Roth, 50% taxable.
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teen persuasion
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Re: BHers, what is your Roth IRA %?

Post by teen persuasion » Wed Jan 09, 2019 10:26 pm

We are currently very roughly 1/3 Roth to 2/3 traditional, or 40% tax free to 60% tax deferred if you include HSA.

I've been trying to figure out if there were an optimal ratio of tax free to tax deferred, given the standard deduction, but I've come to the same conclusion as another poster: it's more of an optimal $ figure, not %. That is, the max $ amount in tax deferred, so that RMDs don't drive the taxability of SS up to where the combined taxable SS + RMD greatly exceed the standard deduction, at least for us.

The other ratio I'm looking at is the breakdown between tax deferred in DH's name vs my name. The state will exempt from taxation the first $20k of withdrawals/conversions from tax deferred accounts for each of us, nontransferrable. To date, I haven't had access to a 401k, and all my IRA contributions are to Roth, so our future state tax free withdrawal limit is only $20k of a possible $40k. If I get access to a SIMPLE this year (being discussed), I intend to contribute as fully as I can to it, shifting $ away from DH's current 401k contributions. I'll never catch him, he's got too big a head start and we'll still be adding the remainder to his 401k, but I'll try to have bit of a balance in the few years I have to contribute.

When we get around to retirement, hopefully somewhat early, I intend to use a Roth ladder, both for early access to the retirement accounts, and to transfer from DH's traditional to Roth accounts. We will be effectively spending from his traditional accounts shrinking them, while letting the Roth accounts and (my traditional?) grow. The tricky part is that the state tax exemption is only in effect if you are retired (I believe they stipulate not working), and >59.5. So any part-time jobs (to allow me to contribute to traditional, perhaps) may be an issue, and early Roth ladder conversions get no exemption.

I'm already resigned to waiting until after the final FAFSA filing for DS5 to begin conversions, as I've realized conversions for a Roth ladder generate double Available Income on the FAFSA (non-taxed Roth withdrawals plus unavailable converted traditional taxable $). That effectively puts us close to age 59.5, anyways.

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oldzey
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Re: BHers, what is your Roth IRA %?

Post by oldzey » Wed Jan 09, 2019 10:31 pm

403b: 62.86%
ROTH: 23.78%
TAXABLE: 13.36%

Does not include cash.
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curmudgeon
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Re: BHers, what is your Roth IRA %?

Post by curmudgeon » Wed Jan 09, 2019 10:56 pm

dwickenh wrote:
Wed Jan 09, 2019 10:21 pm
44% ira
49% taxable
7% Roth IRA.

Conversions slow now with ACA subsidies. I intend to end up at 25% ira, 25% Roth, 50% taxable.
This is very similar to the situation for my wife and I. It's possible we'll end up more like 33% ira, 33% Roth, 33% taxable as we draw down from taxable over the next ten years before hitting SS and RMDs. We've got five years of moderate sized conversions while we are staying under the ACA cliff, and then five years with more flexibility. When we are coming up to medicare age, I'll look more closely at the future tax prognosis.

fennewaldaj
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Re: BHers, what is your Roth IRA %?

Post by fennewaldaj » Wed Jan 09, 2019 11:53 pm

Currently (on ~325k porfolio)
21.4% Taxable (including e fund some money lent to my farmer dad and a private company stock)
36.9% tax differed
41.7% Roth + HSA

New money
~30-35% Roth + HSA
65-70% tax differed
0-10% taxable

Basically while I was going to school what savings we had went into Roths (due to expected higher income later) and taxable(due wanting to have more available money) so we have a lot of Roth and taxable now but that will go down with time. Taxable we just won't have them money to save in and Roth we are saving less of our money in

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infotrader
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Re: BHers, what is your Roth IRA %?

Post by infotrader » Thu Jan 10, 2019 12:04 am

sergeant wrote:
Wed Jan 09, 2019 9:51 pm
infotrader wrote:
Wed Jan 09, 2019 2:41 pm
MathWizard wrote:
Wed Jan 09, 2019 2:27 pm
We are at about 20% of our portfolio in ROTH the rest in taxable
(not counting first tier EF in savings account), the same as you, as similar ages.

I'm surprised that you were able to get $600K in your ROTHs. Was some of this from ROTH 401K
or from ROTH conversions (or backdoor ROTH)?
You are right. We use the backdoor Roth approach.
WOW! That is an exceptional rate of return on those assets. Care to explain how you were able to achieve such results, on such a small amount of deposits in such a short time span? Is it possible you meant conversions not backdoor?

We have been doing backdoor since it became a possibility and some small conversions and have about half what you have in Roth. Roth 10%- Tax-deferred 50%- Taxable 40%
We have been using the mega backdoor ($55k annual max) for the past 2 years. However, the bulk of our Roth (about 450k) are from annual deposits over the years. No company roth 401k.

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infotrader
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Re: BHers, what is your Roth IRA %?

Post by infotrader » Thu Jan 10, 2019 12:12 am

MnD wrote:
Wed Jan 09, 2019 9:53 pm
0%.
In the mid-1980's we had 401-K training (when our organization started offering one) that explained that deferring compensation and the taxes on it when you are working in a higher bracket and then spending that money when you are not working and in a lower tax bracket is financially advantageous. 30+ years later and just retired that's exactly the way it's worked out. Every dime of income I've deferred would have been taxed at the top bracket at the time which was 28%, 31% or higher (deferral avoiding triggering AMT). When spending, even if you apply other income to the lowest brackets first, it will be taxed at a blend of 12% and 22% and yet provide the same financial standard of living as when working and in much higher brackets.

Others here have provided specific examples of just how large a portfolio must grow to for RMD's to approach typical BH's marginal tax brackets when working. I'm not worried about that after running the actual specifics. I would encourage people to actually work the numbers to see what their individual risk of this is versus hand-waving about RMD's. Some of the worst advice I've ever received on this board in the past (which fortunately I didn't follow) includes making Roth conversions while working to the top of the 28% bracket, to blindly contribute to Roth just for "tax diversity" and to assume "marginal tax rates will certainly go up" when in fact they went down.
All I can say is that everyone's situation is different. There is not a single formula for all.
Things can be tricky for those with pensions. I have a friend who retired at 70. He was contributing to 2 deferral plans over the years to the max. His 2018 income is over 300k, about 100k more than the last year when he was working. Of course, many would say it is a nice problem to have.

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celia
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Re: BHers, what is your Roth IRA %?

Post by celia » Thu Jan 10, 2019 12:32 am

Leif wrote:
Wed Jan 09, 2019 5:21 pm
In my portfolio spreadsheet I divide my accounts into:

Taxable
Tax Deferred (tax to be paid on withdrawal)
Tax Exempt (never taxed, i.e. Roth IRA)
When we divide our accounts up by tax treatment, we usually say: Taxable, Tax-deferred, and Roth (or After-Tax).

It isn't technically correct that the Roth was "never taxed". The money *WAS* taxed before it went into the account.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

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Portfolio7
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Re: BHers, what is your Roth IRA %?

Post by Portfolio7 » Thu Jan 10, 2019 12:39 am

Unfortunately, only about 1.5% of our retirement savings are in Roth IRA/401K. I don't anticipate having the cash flow to convert any material sums from IRA/401K to Roth IRA for another 5 years or more. I would like to convert most or all of it before retirement in roughly ten years because, as I understand it, at a certain amount of normal income SS becomes taxable. I'd like to avoid that at least. It will take some fortunate events to get there I think, but we'll see.
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grabiner
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Re: BHers, what is your Roth IRA %?

Post by grabiner » Thu Jan 10, 2019 8:03 am

celia wrote:
Thu Jan 10, 2019 12:32 am
Leif wrote:
Wed Jan 09, 2019 5:21 pm
In my portfolio spreadsheet I divide my accounts into:

Taxable
Tax Deferred (tax to be paid on withdrawal)
Tax Exempt (never taxed, i.e. Roth IRA)
When we divide our accounts up by tax treatment, we usually say: Taxable, Tax-deferred, and Roth (or After-Tax).

It isn't technically correct that the Roth was "never taxed". The money *WAS* taxed before it went into the account.
However, an HSA is money that was never taxed, and for asset allocation purposes, it is equivalent to a Roth since it won't be taxed on withdrawal either.
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asif408
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Re: BHers, what is your Roth IRA %?

Post by asif408 » Thu Jan 10, 2019 8:35 am

I'm at about 75% Roth/HSA, 25% Traditional IRA/Taxable. But I'm also younger than many here (in my late 30s, if that is still young), and didn't really start contributing heavily to IRAs until about 5-6 years ago. But since I currently am in, and expect to be for the foreseeable future, a relatively low tax bracket, and don't have a traditional 401(k) through work (I have a pension), I've been contributing to Roths and HSAs almost exclusively. I've also done some conversions from traditional to Roth, but am thinking it might be useful to keep 10-20% in the traditional, just because there are some advantages, like being able to make a one time conversion of traditional IRA funds to an HSA if needed for medical reasons.

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elgob.bogle
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Re: BHers, what is your Roth IRA %?

Post by elgob.bogle » Thu Jan 10, 2019 9:12 am

50% right now, but will begin converting wife's tIRA funds in 2020 when she retires/turns 65. Hope to get all conversions done before the Trump Tax Cuts expire/she turns 70. We will have saved lots of tax $$ if can get accomplished. End goal is 95% ROTH IRA & 5% cash.

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GrowthSeeker
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Re: BHers, what is your Roth IRA %?

Post by GrowthSeeker » Thu Jan 10, 2019 9:24 am

Roth: 0.5%
tIRA: 19.5%
Taxable: 80%

Age 66, retired.
Planning to aggressively Roth convert between now and RMDs aiming for 10%/10%/80% (R/tIRA/taxable)
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fposte
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Re: BHers, what is your Roth IRA %?

Post by fposte » Thu Jan 10, 2019 9:37 am

Post-tax/Roth: 5%
Pretax: 7%
Taxable: 88%

Contributions for the next few years are all post-tax, so that'll shift a little. But all the converting that's going to be done has been done.

BD w/ Kung-Fu Grip
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Re: BHers, what is your Roth IRA %?

Post by BD w/ Kung-Fu Grip » Thu Jan 10, 2019 9:45 am

Intending to retire early and wash traditional through Roth with a 5-year lag, ~15% of retirement contributions are mega back-door conversions so that my basis keeps accumulating, to get me through the first 5-year lag period after retirement.

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teen persuasion
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Re: BHers, what is your Roth IRA %?

Post by teen persuasion » Thu Jan 10, 2019 9:50 am

celia wrote:
Thu Jan 10, 2019 12:32 am
Leif wrote:
Wed Jan 09, 2019 5:21 pm
In my portfolio spreadsheet I divide my accounts into:

Taxable
Tax Deferred (tax to be paid on withdrawal)
Tax Exempt (never taxed, i.e. Roth IRA)
When we divide our accounts up by tax treatment, we usually say: Taxable, Tax-deferred, and Roth (or After-Tax).

It isn't technically correct that the Roth was "never taxed". The money *WAS* taxed before it went into the account.
Maybe not - our early Roth contributions were all never taxed - I used refundable credits to fully fund them. Even now, at least half of our contributions come from refundable credits, and the remainder only has FICA and possibly a small amount of state tax applied.

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Re: BHers, what is your Roth IRA %?

Post by teacher » Thu Jan 10, 2019 10:09 am

We converted funds from a 401k and 403b to ROTHs as much as taxes made feasible until the age of 70.5 when RMD "income" precluded any more ROTH conversions, leaving 43% in our ROTHs. RMDs put us in a high tax bracket and increase Medicare costs. I am telling my sons to shelter in a ROTH as much as they can.

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TierArtz
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Re: BHers, what is your Roth IRA %?

Post by TierArtz » Thu Jan 10, 2019 10:14 am

Roth: 38%
Tax deferred: 19%
Taxable, including a bit of tax free bonds: 43%

We have no tIRA balance and will backdoor fund the Roths until retirement in early 60s (roughly 5 years from now). Roughly 50K per year will flow into tax deferred and into taxable, so the Roth percentage will shrink.

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Re: BHers, what is your Roth IRA %?

Post by The Wizard » Thu Jan 10, 2019 10:30 am

15% of my financial assets are in my Roth IRAs presently.
At start of retirement in 2013, my Roth percentage was 1-2% due to large 403(b) contributions for decades.
So the change is due to a combination of Roth conversions and spend-down from my tax-deferred account.

As far as optimal strategy, it makes zero sense to do any Roth conversions during your latter full time working years for most people.
So you can do a $7000/person Roth contribution this year.
You may also be to contribute partially to a Roth 401(k) or 403(b) but that seldom makes sense in your high income latter working years.

It also makes little sense to do Roth conversions after age 70, especially for those of us who are delaying SS until age 70.

So that leaves the years between start of retirement and age 70, seven years in my case, to do Roth conversions.

But how much?
I don't believe in paying high taxes of say $30,000 per year in my 60's so that I can have lower taxes of say $15,000 per year in my 70's.
So I just do moderate Roth conversions with the amount computed to approximately levelize my AGI pre and post 70.

Now for married couples, you need to figure what the survivor's income (and taxes!) will look like after the first one passes.
Depending on those findings, it might make sense to do somewhat higher Roth conversions than would be justified for a single person...
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ryman554
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Re: BHers, what is your Roth IRA %?

Post by ryman554 » Thu Jan 10, 2019 10:42 am

There is a much better way to look at it.

Currently, I have 44% of my stuff where I have to pay marginal tax rates. This includes 401(k) and tIRAs.
Currently, I have 53% of my stuff where I have to pay no tax at all. This includes roth IRAS, HSAs, and basis on my taxable account.
Currently, I have 3% of my stuff where I (may) have to pay (long-term) capital gains. This includes only gains on my taxable monies.
(not included) is another 50% of my portfolio locked up in home equity, of which $500k is tax-free and another $70k or so of LTCG, and the rest untaxed basis.

So, I call it 50-50 pre-tax/post-tax + whatever I do with the house in the medium-term, heavily skewed to not-taxed. Good enuf for me, but it's not really by design, it's just how it turned out.

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Re: BHers, what is your Roth IRA %?

Post by wolf359 » Thu Jan 10, 2019 10:57 am

infotrader wrote:
Wed Jan 09, 2019 9:42 pm
calmaniac wrote:
Wed Jan 09, 2019 7:41 pm
infotrader wrote:
Wed Jan 09, 2019 7:21 pm
Inheritance, I guess.
One thought, if at some point you have grandchildren of sufficient age (≥18y?) for whom you have a good sense will not blow the money, make them beneficiaries of some of that Roth account. Since their RMD will be based on their life expectancy, this allows the Roth to continue to grow tax free for years after your passing. Potentially, many more tax-free decades than with an older adult beneficiary.

Roth2
Never thought about that. Great idea.
This is known as a stretch Roth IRA, and is a great idea.

However, it has a huge political risk attached. Retirement accounts were intended for retirement, not for estate planning. To avoid prohibitions on politics, I will not debate the policy merits or issues. However, I'd be remiss if I didn't point out that politicians have targeted this feature in the past, and have proposed requiring inherited Roth accounts to be dispersed within 5 years of inheritance. Few people use IRAs in this fashion, so the political risk of implementing it is low.

One consideration should be the risk that a measure similar to that might pass in the (hopefully) many years before you pass away and that your grandkids inherit. The picture is different for a 50 year old versus a 70 year old versus a 90 year old. I'm not sure you can rely on tax law staying the same for the required amount of time.

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Darth Xanadu
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Location: Middle Earth

Re: BHers, what is your Roth IRA %?

Post by Darth Xanadu » Thu Jan 10, 2019 10:59 am

grabiner wrote:
Thu Jan 10, 2019 8:03 am
celia wrote:
Thu Jan 10, 2019 12:32 am
Leif wrote:
Wed Jan 09, 2019 5:21 pm
In my portfolio spreadsheet I divide my accounts into:

Taxable
Tax Deferred (tax to be paid on withdrawal)
Tax Exempt (never taxed, i.e. Roth IRA)
When we divide our accounts up by tax treatment, we usually say: Taxable, Tax-deferred, and Roth (or After-Tax).

It isn't technically correct that the Roth was "never taxed". The money *WAS* taxed before it went into the account.
However, an HSA is money that was never taxed, and for asset allocation purposes, it is equivalent to a Roth since it won't be taxed on withdrawal either.
Good point; also, SOME of the Roth IRA money was taxed (contributions) but, some will never be (earnings).

Edit: In my spreadsheet, I call it "Tax Free" which is really just my shorthand for "not taxed upon withdrawal".
"A courageous teacher, failure is."

MnD
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Re: BHers, what is your Roth IRA %?

Post by MnD » Thu Jan 10, 2019 2:11 pm

infotrader wrote:
Thu Jan 10, 2019 12:12 am
MnD wrote:
Wed Jan 09, 2019 9:53 pm
0%.
In the mid-1980's we had 401-K training (when our organization started offering one) that explained that deferring compensation and the taxes on it when you are working in a higher bracket and then spending that money when you are not working and in a lower tax bracket is financially advantageous. 30+ years later and just retired that's exactly the way it's worked out. Every dime of income I've deferred would have been taxed at the top bracket at the time which was 28%, 31% or higher (deferral avoiding triggering AMT). When spending, even if you apply other income to the lowest brackets first, it will be taxed at a blend of 12% and 22% and yet provide the same financial standard of living as when working and in much higher brackets.

Others here have provided specific examples of just how large a portfolio must grow to for RMD's to approach typical BH's marginal tax brackets when working. I'm not worried about that after running the actual specifics. I would encourage people to actually work the numbers to see what their individual risk of this is versus hand-waving about RMD's. Some of the worst advice I've ever received on this board in the past (which fortunately I didn't follow) includes making Roth conversions while working to the top of the 28% bracket, to blindly contribute to Roth just for "tax diversity" and to assume "marginal tax rates will certainly go up" when in fact they went down.
All I can say is that everyone's situation is different. There is not a single formula for all.
Things can be tricky for those with pensions. I have a friend who retired at 70. He was contributing to 2 deferral plans over the years to the max. His 2018 income is over 300k, about 100k more than the last year when he was working. Of course, many would say it is a nice problem to have.
I do have a pension that covers actual basic expenses but it is still highly advantageous to have utilized tax deferred accounts versus Roth. To generate the exact same very comfortable and non-frugal take-home pay in retirement, our gross income has dropped by 100K per year and income and payroll taxes are reduced by 2/3rds versus 2018 with very advantageous margin tax rates versus when working and deferring the income which were (28%, 31% or 31%+ depending on the decade). Under a variable withdrawal model and average sequence of returns, we should stay in the middle of the 22% bracket for decades. In a poor sequence of returns again no tax worries. The RMD "tax bomb" at 70 is a lower variable percentage than we are taking out now. I could speculate about the advantages of Roth conversions if far above average sequence of market returns comes to pass (which would be a nice problem to have), living to 98 or "taxes of course must go up". But I've learned over the decades to avoid overly optimistic or pessimistic assumptions when managing our families money and it's paid off very nicely. The old rule about not paying taxes before one has to hasn't been a bad one to follow either.

That said I haven't ruled out conversions within the 22% bracket space, but we won't be 100% on retirement income streams until 2020 so I guess I have 11+ months to think and study more on that.

The Wizard
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Re: BHers, what is your Roth IRA %?

Post by The Wizard » Thu Jan 10, 2019 2:32 pm

MnD wrote:
Thu Jan 10, 2019 2:11 pm
...The old rule about not paying taxes before one has to hasn't been a bad one to follow either.
I agree, but it has to be tempered with reality and reasonableness.
If your AGI increases by 5% the year you turn 70.5, that's no biggie.

But if it increases by 50%, then you'll be paying a lot more income taxes henceforth and it would have been better to have done things in the 5-10 years preceding to have lessened that jump...
Attempted new signature...

jj
Posts: 205
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Re: BHers, what is your Roth IRA %?

Post by jj » Thu Jan 10, 2019 4:24 pm

Roth/HSA 7%
Tax-deferred 18%
Taxable 75%

Our Roths are all conversions since 2012, that being the first year it made sense due to early retirement. There are another 7 years where we will be able to convert until the oldest of us reaches their RMD year. We have converted at relatively low tax cost up to a 30% marginal bracket due to high schedule A deductions (property taxes, medical deduction, charity). We do not anticipate drawing from tax-deferred until after age 70, so the taxable percentage will probably decrease as we spend down. Each year as much will be converted to Roth as makes sense in that tax year. In the past 7 years we have converted as much as $80,000 in one year and another year nothing.

We started HSAs 5 years ago, one year we could not contribute as there was no HDHP available on the exchange. As the first of us reaches Medicare age we will have a reduced HSA contribution, the $1000 catch-up. The other spouse can contribute the full family amount as we have a young dependent on a family policy.

I shall be content to reach a level of 10% in Tax-Exempt accounts. I would be ecstatic to have 50%, but that is not to be...
...it is madness to risk losing what you need in pursuing what you simply desire. Warren E. Buffett

noco-hawkeye
Posts: 368
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Re: BHers, what is your Roth IRA %?

Post by noco-hawkeye » Thu Jan 10, 2019 4:55 pm

I think its roughly split evenly between roth / traditional 401k / taxable investments. This is not on purpose, just luck that it has worked out this way.

The one game that I might be playing is to try to get ACA subsidies if / when I retire early. Having some different options I hope will help with this situation. I do not expect to be jumping 15% in marginal taxes just because a RMD is going to occur. Thats a really tough problem to have, my heart goes out to you. :wink:

DA200
Posts: 171
Joined: Fri Feb 06, 2015 3:47 pm

Re: BHers, what is your Roth IRA %?

Post by DA200 » Thu Jan 10, 2019 5:17 pm

Roth 2%
Tax deferred 48%
Taxable 50%

Plan to do Roth conversions between beginning of retirement in 2022 (Age 55) and 2037 (Age 70) (all while receiving a pension).
Plan to be more aggressive first few years and may reduce conversions later due to possible tax rate changes in 2025 and IRMAA starting at age of 63. Might also need to consider how conversions influence health insurance rates/ACA if it exists in 2022.
Our hope is to reach the following:
Roth 30%
Tax deferred 30%
Taxable 40%

In the end, the optimization of conversions to maximize total portfolio will likely be highly suboptimal due to inheritance of further tax deferred accounts leading to more RMDs and/or loss of spouse leading to unplanned higher tax brackets...... Bottom line is that there are too many unknowns to have a perfect plan.
Last edited by DA200 on Thu Jan 10, 2019 6:04 pm, edited 2 times in total.

Shamb3
Posts: 27
Joined: Mon Apr 09, 2018 8:58 pm

Re: BHers, what is your Roth IRA %?

Post by Shamb3 » Thu Jan 10, 2019 5:54 pm

This is all hypothetical, I doubt it will work out perfectly and match my spread sheets.
Leaving some in the traditional wouldn't hurt much because I don't have a pension either.

Current total tax rate is about 25%.
30% taxable, 40% Traditional, 30% Roth.

Age 53- 60
Spend down taxable. ( <10% in taxes due to it being nearly half contributions)
Convert Traditional to Roth between 15% and 25% tax rate.

0% taxable, 40% traditional, 60% Roth

Age 60 - 70
Spend primarily from traditional 401k with effective tax rate 15-25%
If I want to spend more, dip into roth

0% taxable, 10% traditional, 90% Roth

Age 70+
Almost everything is in Roth, don't worry about it

Topic Author
infotrader
Posts: 174
Joined: Tue Feb 28, 2017 2:39 pm

Re: BHers, what is your Roth IRA %?

Post by infotrader » Thu Jan 10, 2019 6:01 pm

MnD wrote:
Thu Jan 10, 2019 2:11 pm
infotrader wrote:
Thu Jan 10, 2019 12:12 am
MnD wrote:
Wed Jan 09, 2019 9:53 pm
0%.
In the mid-1980's we had 401-K training (when our organization started offering one) that explained that deferring compensation and the taxes on it when you are working in a higher bracket and then spending that money when you are not working and in a lower tax bracket is financially advantageous. 30+ years later and just retired that's exactly the way it's worked out. Every dime of income I've deferred would have been taxed at the top bracket at the time which was 28%, 31% or higher (deferral avoiding triggering AMT). When spending, even if you apply other income to the lowest brackets first, it will be taxed at a blend of 12% and 22% and yet provide the same financial standard of living as when working and in much higher brackets.

Others here have provided specific examples of just how large a portfolio must grow to for RMD's to approach typical BH's marginal tax brackets when working. I'm not worried about that after running the actual specifics. I would encourage people to actually work the numbers to see what their individual risk of this is versus hand-waving about RMD's. Some of the worst advice I've ever received on this board in the past (which fortunately I didn't follow) includes making Roth conversions while working to the top of the 28% bracket, to blindly contribute to Roth just for "tax diversity" and to assume "marginal tax rates will certainly go up" when in fact they went down.
All I can say is that everyone's situation is different. There is not a single formula for all.
Things can be tricky for those with pensions. I have a friend who retired at 70. He was contributing to 2 deferral plans over the years to the max. His 2018 income is over 300k, about 100k more than the last year when he was working. Of course, many would say it is a nice problem to have.
I do have a pension that covers actual basic expenses but it is still highly advantageous to have utilized tax deferred accounts versus Roth. To generate the exact same very comfortable and non-frugal take-home pay in retirement, our gross income has dropped by 100K per year and income and payroll taxes are reduced by 2/3rds versus 2018 with very advantageous margin tax rates versus when working and deferring the income which were (28%, 31% or 31%+ depending on the decade). Under a variable withdrawal model and average sequence of returns, we should stay in the middle of the 22% bracket for decades. In a poor sequence of returns again no tax worries. The RMD "tax bomb" at 70 is a lower variable percentage than we are taking out now. I could speculate about the advantages of Roth conversions if far above average sequence of market returns comes to pass (which would be a nice problem to have), living to 98 or "taxes of course must go up". But I've learned over the decades to avoid overly optimistic or pessimistic assumptions when managing our families money and it's paid off very nicely. The old rule about not paying taxes before one has to hasn't been a bad one to follow either.

That said I haven't ruled out conversions within the 22% bracket space, but we won't be 100% on retirement income streams until 2020 so I guess I have 11+ months to think and study more on that.
Good point. I think that one advantage of having tax deferred account is to have some flexibility when comes to taxes. If you have converted all your tax deferred and your taxable income is low, you may not be able to take full advantage of the lower end of tax brackets.

michaeljc70
Posts: 4129
Joined: Thu Oct 15, 2015 3:53 pm

Re: BHers, what is your Roth IRA %?

Post by michaeljc70 » Thu Jan 10, 2019 6:25 pm

My portfolio breakdown is:

67% tIRA
15% taxable
9% HSA (invested, never used)
9% Roth

I'm hoping to do some conversions to Roth during early retirement. Though I don't have any regrets as I don't think my marginal retirement tax rate will be higher than my marginal working tax rate.
Last edited by michaeljc70 on Thu Jan 10, 2019 6:27 pm, edited 1 time in total.

stimulacra
Posts: 472
Joined: Wed Dec 21, 2016 3:50 pm
Location: Houston

Re: BHers, what is your Roth IRA %?

Post by stimulacra » Thu Jan 10, 2019 6:26 pm

I'm 41 years old. There's seldom been a year where the additional tax deduction for 401k/IRA would not have come in handy.

Roth IRA, Roth 401(k) & HSA = 5%
Traditional IRA, 401(k), 403(b), etc. = 90%
Taxable = 5%

Leroy Jones
Posts: 31
Joined: Thu Nov 16, 2017 8:14 pm

Re: BHers, what is your Roth IRA %?

Post by Leroy Jones » Thu Jan 10, 2019 7:46 pm

My investments are 72% tax deferred, 23% Roth, 5% cash
Leroy Jones :sharebeer

fcf18
Posts: 19
Joined: Wed Jun 13, 2018 9:35 pm

Re: BHers, what is your Roth IRA %?

Post by fcf18 » Thu Jan 10, 2019 9:19 pm

Darth Xanadu wrote:
Wed Jan 09, 2019 1:28 pm
My tax-free balances are currently ~41% of my portfolio (Roth IRA, Roth 401k, and HSA).

My goal over time is to end up with approx 1/3 each in tax-free, tax-deferred, and taxable, to provide maximum flexibility for managing tax liabilities in (and potentially beyond, i.e. legacy) retirement.
same here, excluding 529, current about 25/40/35 in taxable/deferred/tax free

veggivet
Posts: 360
Joined: Sun Jan 25, 2015 1:07 pm
Location: New England

Re: BHers, what is your Roth IRA %?

Post by veggivet » Thu Jan 10, 2019 9:30 pm

Tax-free balance 27% of retirement assets, and is comprised of Roth IRA, Roth 401k, and HSA. Will convert tIRA to Roth to fill up 12% bracket over the next 11 years before RMDs start with the goal of raising percentage to around 35%.
If you watch your pennies, your dollars will take care of themselves.

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