BHers, what is your Roth IRA %?

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

Post by dharrythomas » Fri Jan 11, 2019 9:08 am

Basically, we’re at 30% Traditional, 30% Taxable, and 40% Roth. Now, I pull money from taxable each year for Roth IRA contributions and my IRA plus match is split 50/50 between Traditional and Roth. So taxable is declining and Roth will be growing faster. My contribution decisions are informed by an Army Reserve pension and a GS pension, both locked in and with SS should just about cover spending requirements.

Traditional will be for contributions and emergencies, Taxable dividends will add to spending, taxable and Roth balances for inheritance.

I’m not Boglehead average, but should be able to retire comfortablely with enough.

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

Post by midareff » Fri Jan 11, 2019 9:11 am

Roughly 7% ..... I was maxing my Deferred Comp IRA for many years and a little lean on excess taxable funds to contribute.

Small Law Survivor
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Re: BHers, what is your Roth IRA %?

Post by Small Law Survivor » Fri Jan 11, 2019 9:41 am

18% in Roth, plus another 2% in HSA. Wish it could be more. But, I plan to do enough conversions in the next couple of years (2019/2020), to bring the Roth percentage to over 20%. At that point social security and RMDs may limit additional conversions.
67 yrs, semi-retired lawyer, 50/40/10 s/b/c, 70/30 dom/int'l. Plan:4% until age 70, 3% when social security kicks in. Boglehead since day 1 under diff names

JW-Retired
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Re: BHers, what is your Roth IRA %?

Post by JW-Retired » Fri Jan 11, 2019 9:50 am

RickBoglehead wrote:
Wed Jan 09, 2019 4:02 pm
Darth Xanadu wrote:
Wed Jan 09, 2019 1:58 pm
RickBoglehead wrote:
Wed Jan 09, 2019 1:32 pm

Of the retirement funds, 88% are ROTH. We expect to have all the non-ROTH converted to ROTH within the first few years of retirement.
Presumably, you'd want at least SOME taxable income every year, to at least take advantage of deductions.
As I indicated in my post, 66% of our portfolio is taxable (non-retirement). Our 88% ROTH is of the other 34% of our portfolio that is retirement assets. By the time we collect Social Security at 70, I expect to have zero RMD requirements.
Rick,
It is hard for me to imagine how this works well but perhaps it does? Can you explain more? Down to zero tax deferred seems extreme.

What marginal tax are you paying for all the Roth conversions now, versus your effective marginal tax in your post 70 situation when collecting max SS? Do you have such a large taxable account that the SS tax is going to be fully phased in on the taxable portfolio dividends/interest/realized cap gains?

How does it work? :?:
JW
Retired at Last

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

Post by RickBoglehead » Fri Jan 11, 2019 10:39 am

JW-Retired wrote:
Fri Jan 11, 2019 9:50 am
Rick,
It is hard for me to imagine how this works well but perhaps it does? Can you explain more? Down to zero tax deferred seems extreme.

What marginal tax are you paying for all the Roth conversions now, versus your effective marginal tax in your post 70 situation when collecting max SS? Do you have such a large taxable account that the SS tax is going to be fully phased in on the taxable portfolio dividends/interest/realized cap gains?

How does it work? :?:
JW
We hopped on the IRA bandwagon a very long time ago, and hopped on the ROTH IRA bandwagon when they first came out.

I had some years where our income was very low. In those years I did ROTH conversions. Not great for income (losing a job), but great for conversions. In some years we were in the bottom tier. Given when that was, the IRAs weren't large at that time. So I could convert a bunch, and then they grew via good investments. So it's not like I had a $1 million IRA and have been converting it. Each year when I did conversions, I sat down with TurboTax and played with the amount I was going to convert to see the income tax ramifications. As of matter of fact, for 2017 I ended up having to reverse part of my conversion (last year to do that) because I did too much.

Each year I do ROTH IRAs, maxed out, including the $1,000 50+.

Due to changing employers earlier in my career, my 401ks all got converted to IRAs, which then led me to do ROTH conversions on them. I also took advantage when they allowed you to spread out the tax on your conversions, had forgotten about that.

When we collect Social Security, my expectation is that between SS, pension, interest, dividends, and cap gains that we will end up in an equal or higher tax bracket than we are most years (2018 may be an exception). In fact, I may be changing my ROTH 2018 contributions to taxable, and changing my 2018 individual 401K contribution to taxable once I am confident that TurboTax is updated and I run the numbers. If it makes a big enough difference, I'll change them. In 2018, my taxable brokerage account peak (picked September, may not have found the exact peak date) was around 44% higher than my cost. I have years of built up gains including in Primecap. It's conceivable that I'll be selling investments with 75% - 100% gains by the time I need the funds.

I also follow the thought process that if invest $6,000 today, and pay the tax on that income, that this $6,000 will be 2 or 3 times that when I retire. Therefore, I'd rather pay tax on $6,000 today than pay tax on $6,000 or $12,000 in ten or more years. If tax rates are the same (doubtful), and I'm in the same tax bracket (uncertain), then you could argue that it's better to invest that tax money today and let it work for you then to pay tax today. All things being equal, I'll give up that potential growth on the tax owed today, and not have to pay taxes in retirement.

Lastly, I have the following beliefs, which may not be correct, but they're mine.

1) I believe that the government will never take away the ROTH benefit, i.e. that everything grows tax free and that all withdrawals are tax free. There would be a revolt. Not a political statement, but if this went away or was partially taxed, it would have to be for FUTURE contributions, i.e. we'd be grandfathered.

2) I also believe that as the years go on, the government is going to have to raise tax rates to pay the bills. Therefore, tax rates in ten years will be higher than they are today. Perhaps substantially higher.

It could be that I've been naive over the years and done conversions that weren't perfectly figured out as compared to those that have figured this out to the exact digit. Maybe I'll have big tax deductions in retirement and wish I had taxable income to offset them. That could be.

I'm ok with that.
Last edited by RickBoglehead on Fri Jan 11, 2019 11:10 am, edited 1 time in total.

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

Post by JBTX » Fri Jan 11, 2019 10:54 am

We are low/mid 50's age. Apart from approximately 1.5 years of "liquid" funds (bank accts, money market, ibonds) and modest 529, all of our savings is in tax advantaged. Approx 40-45% Roth and 55-60% traditional. Twenty years ago I did some large Roth conversions from a 401k rollover when they for a brief period were allowing you to take conversion tax gains and spread it over several years. I think my marginal rate was in the mid-high 20's.

If we get the opportunity in a future low marginal rate to do conversions prior to social security, we will do additional conversions, although I am thinking our opportunities will be limited, as my wife will probably be working for a while longer, as she has a good small company job she really likes and it pays well.

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

Post by celia » Fri Jan 11, 2019 2:52 pm

stimulacra wrote:
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%
Of course, if there's a way to lower your taxes, that sounds good. But are you aware that when you start RMDs and SS, your tax rate may be even higher than if you just paid the taxes now? In my opinion, it looks like you are pushing way too much into tax-deferred and the long term consequences have not been considered.

You are also not taking advantage of tax diversity. Everything in those withdrawals will be taxed at the rates in effect at that time, whereas we have some of the lowest tax rates right now (that will expire in 2026, unless renewed by Congress).

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

Post by StormShadow » Fri Jan 11, 2019 3:00 pm

Not as high as I wish it could be.

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

Post by celia » Fri Jan 11, 2019 3:03 pm

JW-Retired wrote:
Fri Jan 11, 2019 9:50 am
RickBoglehead wrote:
Wed Jan 09, 2019 4:02 pm
As I indicated in my post, 66% of our portfolio is taxable (non-retirement). Our 88% ROTH is of the other 34% of our portfolio that is retirement assets. By the time we collect Social Security at 70, I expect to have zero RMD requirements.
Rick,
It is hard for me to imagine how this works well but perhaps it does? Can you explain more? Down to zero tax deferred seems extreme.
I don't see it as extreme at all. It is the same as if retirement accounts had never existed, EXCEPT that the growth in Roth will never be taxed. This would be ideal for many people, especially for those who don't need withdrawals for living expenses. It also simplifies your portfolio since you/spouse don't even have to think about RMDs for the rest of your life, especially if cognitive decline sets in and you forget to take your RMDs.

For another way of looking at it, see my signature below and think of the spending power each dollar has:
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.

michaeljc70
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Re: BHers, what is your Roth IRA %?

Post by michaeljc70 » Fri Jan 11, 2019 3:04 pm

celia wrote:
Fri Jan 11, 2019 2:52 pm
stimulacra wrote:
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%
Of course, if there's a way to lower your taxes, that sounds good. But are you aware that when you start RMDs and SS, your tax rate may be even higher than if you just paid the taxes now? In my opinion, it looks like you are pushing way too much into tax-deferred and the long term consequences have not been considered.

You are also not taking advantage of tax diversity. Everything in those withdrawals will be taxed at the rates in effect at that time, whereas we have some of the lowest tax rates right now (that will expire in 2026, unless renewed by Congress).
It just depends. If you make a $150k/yr and live on 60k and want 60k for retirement, your income isn't going to be higher in retirement unless you worked too long/over saved for your goal.

Put another way, if you are saving for a certain income to roughly match your working income that will come from RMDs and SS, it is unlikely that that would ever be more than your working income. Now, some people save like crazy and work longer than needed and that puts you in a different situation.

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

Post by stimulacra » Fri Jan 11, 2019 3:05 pm

celia wrote:
Fri Jan 11, 2019 2:52 pm
stimulacra wrote:
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%
Of course, if there's a way to lower your taxes, that sounds good. But are you aware that when you start RMDs and SS, your tax rate may be even higher than if you just paid the taxes now? In my opinion, it looks like you are pushing way too much into tax-deferred and the long term consequences have not been considered.

You are also not taking advantage of tax diversity. Everything in those withdrawals will be taxed at the rates in effect at that time, whereas we have some of the lowest tax rates right now (that will expire in 2026, unless renewed by Congress).
It may be, the numbers I've run over the past few years suggests that it probably won't be. I'm open to new approaches though.

Maybe 2019 is the year I max out my Roth IRA :)

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

Post by celia » Fri Jan 11, 2019 3:18 pm

michaeljc70 wrote:
Fri Jan 11, 2019 3:04 pm
Put another way, if you are saving for a certain income to roughly match your working income that will come from RMDs and SS, it is unlikely that that would ever be more than your working income.
But your RMDs won't stay level, unless you have a low growth rate in the tax-deferred account. They start at 3.65% and increase each year while the tax-deferred account continues to grow until your mid-80s (on average). As long as the amount you withdraw each year is less than the growth in the account, the account will keep growing. Of course, there will be some "down" years, so maybe that will help keep a lid on the growth. :D
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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TomatoTomahto
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Re: BHers, what is your Roth IRA %?

Post by TomatoTomahto » Fri Jan 11, 2019 3:22 pm

stimulacra wrote:
Fri Jan 11, 2019 3:05 pm
Maybe 2019 is the year I max out my Roth IRA :)
2019 is the year we started maxing out the Roth 401k.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Ice-9
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Re: BHers, what is your Roth IRA %?

Post by Ice-9 » Fri Jan 11, 2019 3:25 pm

Approximately 11% of my retirement portfolio is in my Roth IRA. Just short of 80% is in tax-deferred accounts.

Scrolling through this thread, I'm realizing I'm on the low end of Roth percentage among Bogleheads.

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