Roth or Traditional based on tax bracket

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bobbyeast
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Roth or Traditional based on tax bracket

Post by bobbyeast » Mon Sep 09, 2019 11:53 am

Hi everyone,

Here's my question/dilemma. Right now, my wife and I combined household income puts us in the 24% tax bracket. Our savings to IRA and 401k are roughly 50/50 split between Roth and Traditional. Given our annual expenses are about 75k, I would imagine the income we would need to withdraw in our retirement years would be roughly that amount or slightly higher, which at current income tax brackets, would put us at 12%. My reasoning for the 50/50 split is to hedge since no one knows what the tax environment will look like 20-30 years from now (we are in our early 30s).

So the question is, I'm curious if the forum thinks 50/50 is a little too heavy on the Roth or if there's a better optimal allocation. I know there's no right answer, but just wondering what other folks would do. Appreciate the comments. Let me know if there's information I'm missing in order to come up with a better analysis.

Chip
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Re: Roth or Traditional based on tax bracket

Post by Chip » Mon Sep 09, 2019 12:00 pm

It sounds like you've thought this through pretty well.

I would be inclined to go 100% traditional since it appears that you are saving at a pretty aggressive rate (I'm extrapolating from 24% bracket and 75k expenses). I'm guessing you'll retire early, with time to do Roth conversions then at low rates.

But I think you'll be doing a backdoor Roth each year, correct? Are you putting any savings in taxable accounts?

Topic Author
bobbyeast
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Re: Roth or Traditional based on tax bracket

Post by bobbyeast » Mon Sep 09, 2019 1:54 pm

Chip wrote:
Mon Sep 09, 2019 12:00 pm
It sounds like you've thought this through pretty well.

I would be inclined to go 100% traditional since it appears that you are saving at a pretty aggressive rate (I'm extrapolating from 24% bracket and 75k expenses). I'm guessing you'll retire early, with time to do Roth conversions then at low rates.

But I think you'll be doing a backdoor Roth each year, correct? Are you putting any savings in taxable accounts?
Thanks for the reply Chip,

Yes, both my wife and I are doing a backdoor Roth each year for $12k total in addition to maxing out our 401ks ($19k/each) and HSAs. We are also saving through a taxable brokerage account. You're correct in that our plans are to retire in our early 50s. Interesting point on the Roth conversions at early retirement. I believe the only problem with that is that upon conversion, I would have to wait 5 years before we can draw principle, correct? I guess the taxable account will have to cover us for those 5 years.

bloom2708
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Re: Roth or Traditional based on tax bracket

Post by bloom2708 » Mon Sep 09, 2019 2:03 pm

Could you do pre-tax for the $19k each and then post-tax to keep stuffing Roth?

I would still do $6k each for Roth IRA (front or back door). I would do pre-tax and put the tax savings post-tax if in-plan Roth conversion is offered at your employer. A good topic to research.
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Olemiss540
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Re: Roth or Traditional based on tax bracket

Post by Olemiss540 » Mon Sep 09, 2019 2:39 pm

bobbyeast wrote:
Mon Sep 09, 2019 1:54 pm
Chip wrote:
Mon Sep 09, 2019 12:00 pm
It sounds like you've thought this through pretty well.

I would be inclined to go 100% traditional since it appears that you are saving at a pretty aggressive rate (I'm extrapolating from 24% bracket and 75k expenses). I'm guessing you'll retire early, with time to do Roth conversions then at low rates.

But I think you'll be doing a backdoor Roth each year, correct? Are you putting any savings in taxable accounts?
Thanks for the reply Chip,

Yes, both my wife and I are doing a backdoor Roth each year for $12k total in addition to maxing out our 401ks ($19k/each) and HSAs. We are also saving through a taxable brokerage account. You're correct in that our plans are to retire in our early 50s. Interesting point on the Roth conversions at early retirement. I believe the only problem with that is that upon conversion, I would have to wait 5 years before we can draw principle, correct? I guess the taxable account will have to cover us for those 5 years.
You will also have a formidable Roth IRA balance from the next 20 years of contributions and growth that can be accessed tax and penalty free to help accommodate the 5 year conversion process.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

Chip
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Re: Roth or Traditional based on tax bracket

Post by Chip » Mon Sep 09, 2019 2:46 pm

bobbyeast wrote:
Mon Sep 09, 2019 1:54 pm
Interesting point on the Roth conversions at early retirement. I believe the only problem with that is that upon conversion, I would have to wait 5 years before we can draw principle, correct? I guess the taxable account will have to cover us for those 5 years.
Yes, each conversion has its own five year clock until you're 59.5. You'll have to forecast if the Roth contributions you will have made by then plus the taxable account would get you through to 59.5 or later. Then of course there is always the option of a 72(t) withdrawal plan from your tIRA.

You can always switch to 100% traditional for a while (and enjoy the tax savings), then switch back to 50/50 (or some other ratio) if your analysis in a future year tells you that pre-tax accounts are getting too large. Since you have 20 years to go you will have plenty of time to make adjustments. None of us have any idea what the markets will do, so retirement planning is an ongoing process, all the way to and through retirement.

My wife and I have done low tax cost conversions for most of the last 18 years of retirement, so we've eaten some of our own cooking so to speak. But we had a taxable account that was large enough to live on while delaying social security and tIRA withdrawals. With a smaller taxable account we would have had to use some of the tIRA withdrawals for living expenses, with the rest going to conversions.

EnjoyIt
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Re: Roth or Traditional based on tax bracket

Post by EnjoyIt » Mon Sep 09, 2019 3:28 pm

bobbyeast wrote:
Mon Sep 09, 2019 11:53 am
Hi everyone,

Here's my question/dilemma. Right now, my wife and I combined household income puts us in the 24% tax bracket. Our savings to IRA and 401k are roughly 50/50 split between Roth and Traditional. Given our annual expenses are about 75k, I would imagine the income we would need to withdraw in our retirement years would be roughly that amount or slightly higher, which at current income tax brackets, would put us at 12%. My reasoning for the 50/50 split is to hedge since no one knows what the tax environment will look like 20-30 years from now (we are in our early 30s).

So the question is, I'm curious if the forum thinks 50/50 is a little too heavy on the Roth or if there's a better optimal allocation. I know there's no right answer, but just wondering what other folks would do. Appreciate the comments. Let me know if there's information I'm missing in order to come up with a better analysis.
If the plan is to retire somewhat early then I would do 100% traditional. Odds are very likely you will not be in the 24% tax bracket in retirement plus you will have many years to do Roth conversions in the 10% and 12% tax bracket guaranteeing the lower rate. Do 100% tax deferred now and then re-evaluate in 8-10 years. For this decision to be a mistake you would need to be hitting the 32% tax bracket in retirement which I suspect is going to be very unlikely. The 32% tax brackets starts at $321,451 and that does not include the standard deduction currently at $24,400 and any other deductions you may have in the future. I hope you understand that only additional dollars above $321,451 will be taxed at 32%. I hope you also understand that some of your money will be taxed at 10%, some at 12%, etc.

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Re: Roth or Traditional based on tax bracket

Post by rkhusky » Mon Sep 09, 2019 3:29 pm

bobbyeast wrote:
Mon Sep 09, 2019 1:54 pm
I guess the taxable account will have to cover us for those 5 years.
If you retire in the year that you turn 55 or later, you can withdraw from your current 401k penalty-free.

I favor investing in Traditional and then Roth converting in the 12% tax bracket for 15 years, the boundary of which is currently north of $100K AGI for MFJ.

deikel
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Re: Roth or Traditional based on tax bracket

Post by deikel » Mon Sep 09, 2019 3:33 pm

if I understand correctly then you do RothIRA but normal 401k ?

In which case you you loose 11k times your 24% taxes, makes 2640 today dollars....if you truly split 50/50 and use a roth 401k, its worse and you forego 5760 today tax dollars

IRA/401k money is always top dollars and taking them out in retirement is always bottom dollar...hard to see how you will not win ...I would do IRA/401k as long as I could in that tax bracket
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FiveK
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Re: Roth or Traditional based on tax bracket

Post by FiveK » Mon Sep 09, 2019 4:22 pm

deikel wrote:
Mon Sep 09, 2019 3:33 pm
...and taking them out in retirement is always bottom dollar...
Although as others have said, traditional is likely correct for the OP, it is not for the quoted reason. That reasoning is the first of two common misconceptions about this issue.

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bobbyeast
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Re: Roth or Traditional based on tax bracket

Post by bobbyeast » Mon Sep 09, 2019 4:49 pm

Sounds like the winner is Traditional. Great point on the Roth conversions during early retirement. I'll continue to make my Roth IRA contributions but will update my 401k contributions to all be towards traditional and then reassess in a couple of years. Thanks for all the advice

deikel
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Re: Roth or Traditional based on tax bracket

Post by deikel » Tue Sep 10, 2019 8:15 am

FiveK wrote:
Mon Sep 09, 2019 4:22 pm
deikel wrote:
Mon Sep 09, 2019 3:33 pm
...and taking them out in retirement is always bottom dollar...
Although as others have said, traditional is likely correct for the OP, it is not for the quoted reason. That reasoning is the first of two common misconceptions about this issue.
Thanks for the link, but that wiki entry should be changed and its example to refute the 'bottom dollar take out' does not make sense

The example in the wiki assumes an additional funding of the IRA, which would allow an additional take out during retirement. The additional take out not being bottom dollars (obviously).

I would argue that is a) not the reality of most people/retirees and b) does not change the fact that you start filling your income in retirement (after social security and/or pensions) with IRA dollars at the most bottom of the tax bracket to a level you decide to need and C) is not the way additional funding into an IRA is used, it is used over a longer time span, not as an additional take out with a fixed SWR

That end level might well be above the level you were taxed during your working years, but its rather unlikely and a personal choice, not a design.
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FiveK
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Re: Roth or Traditional based on tax bracket

Post by FiveK » Tue Sep 10, 2019 8:34 am

deikel wrote:
Tue Sep 10, 2019 8:15 am
The example in the wiki assumes an additional funding of the IRA, which would allow an additional take out during retirement. The additional take out not being bottom dollars (obviously).
I would argue that is a) not the reality of most people/retirees
It is the reality for every IRA contribution except the first. One can't (perhaps "shouldn't" is more apt) ignore an existing traditional balance when evaluating the consequences of a new contribution. In other words, think of the traditional account on a First In First Out (FIFO) basis: you only get to remove later contributions after you have removed earlier ones.
and b) does not change the fact that you start filling your income in retirement (after social security and/or pensions) with IRA dollars at the most bottom of the tax bracket to a level you decide to need
The presence of SS and/or pensions only reinforces the wiki's point.
and C) is not the way additional funding into an IRA is used, it is used over a longer time span, not as an additional take out with a fixed SWR
That end level might well be above the level you were taxed during your working years, but its rather unlikely and a personal choice, not a design.
Not sure what the difference is between "over a longer time span" vs. "as an additional take out."

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Re: Roth or Traditional based on tax bracket

Post by deikel » Tue Sep 10, 2019 9:54 am

FiveK wrote:
Tue Sep 10, 2019 8:34 am
deikel wrote:
Tue Sep 10, 2019 8:15 am
The example in the wiki assumes an additional funding of the IRA, which would allow an additional take out during retirement. The additional take out not being bottom dollars (obviously).
I would argue that is a) not the reality of most people/retirees
It is the reality for every IRA contribution except the first. One can't (perhaps "shouldn't" is more apt) ignore an existing traditional balance when evaluating the consequences of a new contribution. In other words, think of the traditional account on a First In First Out (FIFO) basis: you only get to remove later contributions after you have removed earlier ones.
and b) does not change the fact that you start filling your income in retirement (after social security and/or pensions) with IRA dollars at the most bottom of the tax bracket to a level you decide to need
The presence of SS and/or pensions only reinforces the wiki's point.
and C) is not the way additional funding into an IRA is used, it is used over a longer time span, not as an additional take out with a fixed SWR
That end level might well be above the level you were taxed during your working years, but its rather unlikely and a personal choice, not a design.
Not sure what the difference is between "over a longer time span" vs. "as an additional take out."
I guess I am stupid, because I still don't get it.

Whatever I put into my IRA today (independent of what is already there), I get a tax break at my current top bracket.

How can this not be taxed lower or equal in the future when I take it out ? (other then I take out more then I currently live on - unrealistic case or the tax law changes - possible).

SS will be taxed some, so lets assume its all taxed to stay conservative, the average SS payment in 2019 is like 18k a year, so the first bracket is gone and part of the second is filled.

From there I have to fill it up until I reach my point of living expenses (plus tax). So, I fill up from the (SS raised) bottom ?

I guess you can argue that the new brackets are so close to each other that if you drop from 24 to 22, its not a big deal and most people operate in these brackets ?

I really ask, because I don't see the right angle yet to understand how this view is incorrect...thanks for taking the time...
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FiveK
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Re: Roth or Traditional based on tax bracket

Post by FiveK » Tue Sep 10, 2019 11:24 am

deikel wrote:
Tue Sep 10, 2019 9:54 am
I guess I am stupid, because I still don't get it.

Whatever I put into my IRA today (independent of what is already there), I get a tax break at my current top bracket.
You aren't alone in thinking this way, because at first glance "save marginal but pay average" seems so reasonable. ;) It would be great if true, but it isn't.
How can this not be taxed lower or equal in the future when I take it out ? (other then I take out more then I currently live on - unrealistic case or the tax law changes - possible).
Indeed those are two possibilities. It may seem unrealistic to you, but even if you don't want to take out more, once reaching age 70.5 Required Minimum Distributions take effect.
SS will be taxed some, so lets assume its all taxed to stay conservative, the average SS payment in 2019 is like 18k a year, so the first bracket is gone and part of the second is filled.
From there I have to fill it up until I reach my point of living expenses (plus tax). So, I fill up from the (SS raised) bottom ?
I guess you can argue that the new brackets are so close to each other that if you drop from 24 to 22, its not a big deal and most people operate in these brackets ?
I really ask, because I don't see the right angle yet to understand how this view is incorrect...thanks for taking the time...
It goes back to the FIFO concept. The money that starts "filling up from the bottom" comes from traditional contributions you made in years gone by. When you consider whether traditional or Roth looks better in this and future years you should look at the tax rates you'll pay for withdrawals on top of what you could make even if you make no further traditional contributions.

There have been several threads here and in other forums discussing this at length (again, you're far from alone in not seeing this immediately). Just two examples:
- The "OMG I get it" one: viewtopic.php?f=1&t=200071&p=3066486#p3065160
- Roth vs Traditional 401K - earliest Bogleheads thread

Despite traditional not being such an overwhelmingly great idea, for most people it will still work out better than Roth.

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Re: Roth or Traditional based on tax bracket

Post by azianbob » Tue Sep 10, 2019 12:50 pm

I would do Roth for everything in the 24% bracket and lower. Only switch to traditional for income above 24%. I would also fill up the Roth in the younger spouse's 401k first, then fill it up in the older spouse's.

I know everyone mentions that you can do many years of Roth conversions later in the 12% bracket when you retire, but are you guys considering:

1. The 12% bracket has a higher chance of being 15% or larger than lower than 12% in the future. We have historically low taxes.

2. Are you guys expecting to have an additional giant pile of cash in your checking account to fund your life while you do these Roth conversions? Most people here are investing heavily and hold very little cash other than an emergency fund. 12% means you can have married income of up to 78950, which with a standard deduction would be $103350. But chances are you will have at least half a million to a million in after tax accounts to retire early at a young age (40-50) you probably will get some interest and dividends from after tax investments around 10-30k. You will then have to sell some after tax investments to make up the rest of the annual money you need to survive which is probably like an extra 50-70k (I'm estimating OP would need 70-90k in retirement). That only leaves you with about 10-15k to do conversions a year. Even if you start at 50, if your traditional 401k balance is 2 million, you will not be able to convert it all to Roth by 70 when you only do that little a year, since most likely the remaining balance will keep growing faster than your conversions.

3. All employer match / profit sharing is pre-tax, so that adds to your 401k pre-tax balance too. Even if you do Roth, the matches will give you traditional balances.

Plus, I feel Roth gives much or flexibility in the future. At 24% I feel it's worth it, but would not do it at 32%.

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FiveK
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Re: Roth or Traditional based on tax bracket

Post by FiveK » Tue Sep 10, 2019 1:01 pm

azianbob wrote:
Tue Sep 10, 2019 12:50 pm
I would do Roth for everything in the 24% bracket and lower.
...
Even if you start [conversions] at 50, if your traditional 401k balance is 2 million, you will not be able to convert it all to Roth by 70 when you only do that little a year.
If one is never above the 24% bracket while working, how will the traditional balance reach $2 million if one does Roth for everything in the 24% bracket and lower?

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Re: Roth or Traditional based on tax bracket

Post by azianbob » Tue Sep 10, 2019 2:03 pm

FiveK wrote:
Tue Sep 10, 2019 1:01 pm
azianbob wrote:
Tue Sep 10, 2019 12:50 pm
I would do Roth for everything in the 24% bracket and lower.
...
Even if you start [conversions] at 50, if your traditional 401k balance is 2 million, you will not be able to convert it all to Roth by 70 when you only do that little a year.
If one is never above the 24% bracket while working, how will the traditional balance reach $2 million if one does Roth for everything in the 24% bracket and lower?
I was saying that many people say to do traditional 401k, and you can convert it to Roth later. I'm saying in that scenario, your traditional balance will be that high when it's time to start converting.

If you do all Roth 401k, then the traditional balance will be lower (only matches) and be more easily convertable.

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FiveK
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Re: Roth or Traditional based on tax bracket

Post by FiveK » Tue Sep 10, 2019 3:22 pm

azianbob wrote:
Tue Sep 10, 2019 2:03 pm
I was saying that many people say to do traditional 401k, and you can convert it to Roth later. I'm saying in that scenario, your traditional balance will be that high when it's time to start converting.

If you do all Roth 401k, then the traditional balance will be lower (only matches) and be more easily convertable.
Perhaps we can agree that, for someone fortunate enough to accumulate a very large tax-advantaged amount, the optimum will have some traditional and some Roth, and the definition of "some" will vary.

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Re: Roth or Traditional based on tax bracket

Post by bloom2708 » Tue Sep 10, 2019 3:29 pm

azianbob wrote:
Tue Sep 10, 2019 12:50 pm
Plus, I feel Roth gives much or flexibility in the future. At 24% I feel it's worth it, but would not do it at 32%.
I wouldn't pay 24% today if 15% looks like the "future" tax bracket.

Flexibility would imply a mix of pre-tax and Roth based on your scenario. All Roth isn't very flexible. It means you paid a lot of tax too soon.

If people are in a position where they can do $19k Roth 401k, they could also do $19k pre-tax + $4,560 to post-tax 401k and (maybe) convert that to Roth. That means they did $6k to regular roth and ~$5k more to Roth and $19k to pre-tax on the same savings rate. They saved more and avoided some tax.

No idea what tax rates will be. But, the amounts in each brackets (whatever the rate) go up with inflation/time. Many unknown variables.
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Re: Roth or Traditional based on tax bracket

Post by Chip » Tue Sep 10, 2019 3:39 pm

azianbob wrote:
Tue Sep 10, 2019 2:03 pm
I was saying that many people say to do traditional 401k, and you can convert it to Roth later. I'm saying in that scenario, your traditional balance will be that high when it's time to start converting.

If you do all Roth 401k, then the traditional balance will be lower (only matches) and be more easily convertable.
It may be more "easily convertible", but you will likely have paid a very high tax cost over the years to achieve that high Roth balance and low traditional balance.

FiveK has mentioned this many times before: You have to revisit the traditional/Roth decision (including conversions) regularly as the balances in your various accounts change. That's because as your balances change your future marginal rates are likely to change.

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Re: Roth or Traditional based on tax bracket

Post by LilyFleur » Tue Sep 10, 2019 3:47 pm

bloom2708 wrote:
Tue Sep 10, 2019 3:29 pm
azianbob wrote:
Tue Sep 10, 2019 12:50 pm
Plus, I feel Roth gives much or flexibility in the future. At 24% I feel it's worth it, but would not do it at 32%.
I wouldn't pay 24% today if 15% looks like the "future" tax bracket.

Flexibility would imply a mix of pre-tax and Roth based on your scenario. All Roth isn't very flexible. It means you paid a lot of tax too soon.

If people are in a position where they can do $19k Roth 401k, they could also do $19k pre-tax + $4,560 to post-tax 401k and (maybe) convert that to Roth. That means they did $6k to regular roth and ~$5k more to Roth and $19k to pre-tax on the same savings rate. They saved more and avoided some tax.

No idea what tax rates will be. But, the amounts in each brackets (whatever the rate) go up with inflation/time. Many unknown variables.
Mostly Roth doesn't necessarily mean someone paid way too much in taxes. A variety of circumstances could contribute to paying a higher marginal tax rate in your 70s and 80s than in the previous ten to 20 years. People divorce and take a financial hit; people with very high risk tolerance might increase their 401k hugely with a stock pick; people lose jobs in their 50s and involuntarily retire. It does happen.

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Re: Roth or Traditional based on tax bracket

Post by EnjoyIt » Tue Sep 10, 2019 4:26 pm

azianbob wrote:
Tue Sep 10, 2019 2:03 pm
FiveK wrote:
Tue Sep 10, 2019 1:01 pm
azianbob wrote:
Tue Sep 10, 2019 12:50 pm
I would do Roth for everything in the 24% bracket and lower.
...
Even if you start [conversions] at 50, if your traditional 401k balance is 2 million, you will not be able to convert it all to Roth by 70 when you only do that little a year.
If one is never above the 24% bracket while working, how will the traditional balance reach $2 million if one does Roth for everything in the 24% bracket and lower?
I was saying that many people say to do traditional 401k, and you can convert it to Roth later. I'm saying in that scenario, your traditional balance will be that high when it's time to start converting.

If you do all Roth 401k, then the traditional balance will be lower (only matches) and be more easily convertable.
I would not do everything in Roth unto the 24% tax bracket. The only way doing traditional is a mistake is if future taxes are higher than 24%. In todays tax environment that would be the 32% tax bracket which is close to $345k/yr living expenses (don't forget the standard deduction.) Odds are that no one in the 24% tax bracket will be spending over $345k/yr in retirement. Don't forget it is every additional taxable dollar above $345k that is taxed at 32%. Some of that money will be taxed at 10% some at 12%, 22%, and the rest at 24%. Realistically, the odds of someone in the 24% bracket saving enough to have more that $184k in taxable income every year is also very low.

Also, I would not try and outguess or assume future tax legislation. For about 20 years people have been touting that taxes can only go up and then this current administration lowered taxes. The previous administration increased taxes that only affected high income earners and would not affect most retirees. Make plans based on what you know and don't try and outguess the future.

I will offer you a scenario where maxing Roth at 24% can be a good idea. A family who was in the top tax bracket in a family business, saving over $110k/yr in pretax accounts for 2 decades who is now sitting on $3.5 million dollars in pre-tax accounts. The family business goes down in flames and they find W2 income where they are in the 24% tax bracket. If they work for another 15 years and allow those pre-tax accounts to grow they will have over $7 million and will end up back in the 32% tax bracket in retirement. This family should definitely be using Roth accounts at 24% during those 15 years of W2 employment. Do you see how far fetched this scenario is to warrant 24% Roth?

Don't jump to conclusion, don't outguess legislation, and run the numbers for yourself. There is no blanket statement that suits everyone.

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FiveK
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Re: Roth or Traditional based on tax bracket

Post by FiveK » Tue Sep 10, 2019 4:49 pm

To toss in another perspective, when the pre-tax amount one wants to use is greater than the contribution limit (e.g., contributing the maximum to a Roth account), the breakeven withdrawal tax rate is somewhat less than the contribution rate.

E.g., for someone with a 5% state tax rate (in addition to the federal rates) on all income, a plausible situation might be the following:
Image

In that situation, someone in the 24% federal bracket now could reasonably choose Roth if expecting a federal rate or 19% or more at withdrawal time. As always, hindsight glasses will be needed to determine whether "reasonably" meant "correctly."

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Re: Roth or Traditional based on tax bracket

Post by azianbob » Tue Sep 10, 2019 5:00 pm

Right now not only are tax rates lower, but the income brackets are larger.

For instance, before the Trump cuts, tax rates were
10% 19400
12% 78950
22% 168400
24% 321450
32% 408200

Now they are
10% 18650
15% 75900
25% 153100
28% 233350
33% 416700

So not only are the %s lower, the amount of money in each bracket is larger. Today you can make up to 321450 and pay 24%, in 2017 if you made that much you would be in the 33% bracket. Of course this is a very simplistic view, I understand with mortgage and other stuff numbers could of been different I am just speaking generally. In fact, anything you make over 75900 youd become in the 25% bracket.

The standard deduction is also higher now compared to the standard + personal exemption from back then.

The new tax rates could revert in 2026, so this is why I would rather get money in now at lower rates.

Also, the issue is not that you don't need 340,000 a year in retirement for expenses. The issue is will you be able to withdraw or convert your whole traditional balance over 10-20 years while staying under the 12-15% bracket while also having enough to pay for your expenses. I am saying it will be difficult when you have a huge balance since your annual growth will be quite large with those big balances. 10% growth in a 2M account is $200k a year. That means you need to convert 200k a year and the balance will stay the same. So I am not sure how you guys are planning to convert your traditional accounts to Roth at 12% a year.

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Re: Roth or Traditional based on tax bracket

Post by EnjoyIt » Tue Sep 10, 2019 5:04 pm

FiveK wrote:
Tue Sep 10, 2019 4:49 pm
To toss in another perspective, when the pre-tax amount one wants to use is greater than the contribution limit (e.g., contributing the maximum to a Roth account), the breakeven withdrawal tax rate is somewhat less than the contribution rate.

E.g., for someone with a 5% state tax rate (in addition to the federal rates) on all income, a plausible situation might be the following:
Image

In that situation, someone in the 24% federal bracket now could reasonably choose Roth if expecting a federal rate or 19% or more at withdrawal time. As always, hindsight glasses will be needed to determine whether "reasonably" meant "correctly."
Nice example that you linked to. In your spreadsheet though, I don't like you using 20% as a dividend or capital gains tax because that is for married filing jointly with an income above $488,851. Very unlikely for someone in the 24% tax bracket.

EnjoyIt
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Re: Roth or Traditional based on tax bracket

Post by EnjoyIt » Tue Sep 10, 2019 5:10 pm

azianbob wrote:
Tue Sep 10, 2019 5:00 pm

.... The issue is will you be able to withdraw or convert your whole traditional balance over 10-20 years while staying under the 12-15% bracket while also having enough to pay for your expenses.
That's the thing. If you find yourself in the fortunate position in retirement to be in a higher tax bracket than 24%, you don't have to limit yourself to the 12% - 15% tax bracket on Roth conversions. You can convert all the way up to 24% if that is what your situation requires while still potentially taking advantage of those lower tax brackets on some of those conversions. The only time it is a mistake is if you end up in a higher than 24% bracket and that is only for those dollars above it and not all of it.

I would rather take advantage on a tax deduction now and risk breaking even on some conversions in the future vs not even giving myself a chance and paying those taxes now.

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FiveK
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Re: Roth or Traditional based on tax bracket

Post by FiveK » Tue Sep 10, 2019 5:16 pm

EnjoyIt wrote:
Tue Sep 10, 2019 5:04 pm
Nice example that you linked to. In your spreadsheet though, I don't like you using 20% as a dividend or capital gains tax because that is for married filing jointly with an income above $488,851. Very unlikely for someone in the 24% tax bracket.
The 20% is not the federal rate, it is the sum of 15% federal on capital gains plus the 5% state tax rate on all income. Seems plausible enough....

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Re: Roth or Traditional based on tax bracket

Post by azianbob » Tue Sep 10, 2019 5:30 pm

EnjoyIt wrote:
Tue Sep 10, 2019 5:10 pm
azianbob wrote:
Tue Sep 10, 2019 5:00 pm

.... The issue is will you be able to withdraw or convert your whole traditional balance over 10-20 years while staying under the 12-15% bracket while also having enough to pay for your expenses.
That's the thing. If you find yourself in the fortunate position in retirement to be in a higher tax bracket than 24%, you don't have to limit yourself to the 12% - 15% tax bracket on Roth conversions. You can convert all the way up to 24% if that is what your situation requires while still potentially taking advantage of those lower tax brackets on some of those conversions. The only time it is a mistake is if you end up in a higher than 24% bracket and that is only for those dollars above it and not all of it.

I would rather take advantage on a tax deduction now and risk breaking even on some conversions in the future vs not even giving myself a chance and paying those taxes now.
However, the growth is tax free in Roth, which I find very flexible in the future. Lets say I need 400k for something in retirement, if I have it in Roth I can take it all without any taxable event or affect on Medicare. But in traditional I cannot as easily do this.

Plus I mentioned now the brackets are lower and bigger. Right now you can pay 24% on up to $321450. If taxes revert to pre-Trump levels, you can only pay 25% until $153100. That means in the future, if you need $100k a year in expenses, you can only convert an additional 53k a year, which might not be enough to get your traditional down low enough so the RMD is not an issue at 70. Also you can only delay SS to 70 at most, so you will have to deal with that additional income at that time. Like I mentioned, a $2M balance will yield roughly a gain of $200k a year at 10%, so you'd go into the 28% bracket just to convert the gain each year.

But yes, if you expect to have less than $1M in your account when you retire, then I guess it is more feasible to do traditional now and still have a plan to convert everything later.

There is also a peace of mind factor, since I am able to save a decent amount of money as it is, I'd rather get the taxes out of the way now in little additional increments and not have to worry about any bigger issues later. I wouldn't do a Roth 401k if it meant I can't contribute the max to my Roth IRA or HSA, but if I have enough of a surplus to contribute to all and still not exceed my expenses I would rather do Roth.

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Re: Roth or Traditional based on tax bracket

Post by willthrill81 » Tue Sep 10, 2019 5:36 pm

rkhusky wrote:
Mon Sep 09, 2019 3:29 pm
bobbyeast wrote:
Mon Sep 09, 2019 1:54 pm
I guess the taxable account will have to cover us for those 5 years.
If you retire in the year that you turn 55 or later, you can withdraw from your current 401k penalty-free.

I favor investing in Traditional and then Roth converting in the 12% tax bracket for 15 years, the boundary of which is currently north of $100K AGI for MFJ.
:thumbsup

Once the OP believes that they are on track to have enough in tax-deferred assets to move them into the 22% bracket in retirement, I would switch to Roth contributions due to the very likely situation where surviving spouse will one day be suddenly forced into a much higher bracket due to RMDs.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

H-Town
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Re: Roth or Traditional based on tax bracket

Post by H-Town » Tue Sep 10, 2019 5:41 pm

bobbyeast wrote:
Mon Sep 09, 2019 11:53 am
Hi everyone,

Here's my question/dilemma. Right now, my wife and I combined household income puts us in the 24% tax bracket. Our savings to IRA and 401k are roughly 50/50 split between Roth and Traditional. Given our annual expenses are about 75k, I would imagine the income we would need to withdraw in our retirement years would be roughly that amount or slightly higher, which at current income tax brackets, would put us at 12%. My reasoning for the 50/50 split is to hedge since no one knows what the tax environment will look like 20-30 years from now (we are in our early 30s).

So the question is, I'm curious if the forum thinks 50/50 is a little too heavy on the Roth or if there's a better optimal allocation. I know there's no right answer, but just wondering what other folks would do. Appreciate the comments. Let me know if there's information I'm missing in order to come up with a better analysis.
You won't find the exact answer until after the facts. I had been in your shoes and tried to come up with the perfect mix of Traditional/Roth. At the end, I came up with a strategy that allow me the most flexibility to deal with tax laws changes in the future:

1) All Roth 401k and Roth IRA in the first few years of my career at starter level salary.
2) All 401k traditional and max Roth IRA when I get into higher bracket, while building up taxable accounts.
3) I keep an eye on 401 traditional balance and projection. As soon as 401k traditional projection at RMD time is firmly in $4M - $5M territory, I will switch to Roth 401k. I would also give myself 15 years of Roth conversion for 150k a year as a factor of the RMD calc.

My taxable accounts will likely end up bigger than tax advantaged accounts. So maxing out traditional 401k during my peak earning years makes sense for my situation.

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Re: Roth or Traditional based on tax bracket

Post by StealthRabbit » Wed Sep 11, 2019 8:07 am

BTDT, but Roth has been a true winner. (with much flexibility), unfortunately we still ended up 70% Traditional Qualified IRA / 401k, and tax latitude (manipulation) is much reduced during retirement yrs.

If young / early in your working yrs, Consider other strategies to improve tax rates (outside of wage income). That will better meet your LT objectives.

food for thought (we are not pros)
Before our 30's...
1) We moved to a high wage no income tax state (next door to a no sales tax state) also FREE FT college instead of going to High School saved our kids $50k. Each!
2) Bought a farm
3) Bought 4+ investment props
4) Set up a few LLC's and businesses
5) Budgeted our acquisitions with LR forecast / objective of FIRE.
6) Positioned our investments to replace wage income (ASAP)
7) Strategically placed appreciated shares into DAF and contributions (for future and perpetual gifting)
8) Lived in a spending mode to enable much time with kids (homeschooled and lived international as a family and formed businesses as family)


Be advised... stuff happens, plans will change OFTEN.
You are doing well to Bank it! (While you have it)
Taxes is one of the million things that will change.

We didn't expect to be eldercare-givers for 30+ yrs
HC and property taxes to increase 300% AFTER retirement
Medical can kill your best laid plans. A friend just lost a $6m business due to unexpected medical needs.
Both our parents lost EVERYTHING after they retired.
Good friends got Madoff'ed (unknown to them) age 76... back to work.

Be wise.

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Re: Roth or Traditional based on tax bracket

Post by rkhusky » Wed Sep 11, 2019 8:19 am

willthrill81 wrote:
Tue Sep 10, 2019 5:36 pm
rkhusky wrote:
Mon Sep 09, 2019 3:29 pm
bobbyeast wrote:
Mon Sep 09, 2019 1:54 pm
I guess the taxable account will have to cover us for those 5 years.
If you retire in the year that you turn 55 or later, you can withdraw from your current 401k penalty-free.

I favor investing in Traditional and then Roth converting in the 12% tax bracket for 15 years, the boundary of which is currently north of $100K AGI for MFJ.
:thumbsup

Once the OP believes that they are on track to have enough in tax-deferred assets to move them into the 22% bracket in retirement, I would switch to Roth contributions due to the very likely situation where surviving spouse will one day be suddenly forced into a much higher bracket due to RMDs.
Depends on their health situation (i.e. life expectancy) and whether they can Roth convert enough to drop below the 22% bracket in latter stages of retirement.

azianbob
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Re: Roth or Traditional based on tax bracket

Post by azianbob » Wed Sep 11, 2019 11:43 am

willthrill81 wrote:
Tue Sep 10, 2019 5:36 pm
rkhusky wrote:
Mon Sep 09, 2019 3:29 pm
bobbyeast wrote:
Mon Sep 09, 2019 1:54 pm
I guess the taxable account will have to cover us for those 5 years.
If you retire in the year that you turn 55 or later, you can withdraw from your current 401k penalty-free.

I favor investing in Traditional and then Roth converting in the 12% tax bracket for 15 years, the boundary of which is currently north of $100K AGI for MFJ.
:thumbsup

Once the OP believes that they are on track to have enough in tax-deferred assets to move them into the 22% bracket in retirement, I would switch to Roth contributions due to the very likely situation where surviving spouse will one day be suddenly forced into a much higher bracket due to RMDs.
Yes, this is another factor to consider for you traditionalists. Currently you are married and in a married bracket. You probably plan to be in a married bracket in retirement and doing conversions. But one spouse can die earlier than expected, meaning you lost out on paying a lower tax rate while alive but now have to pay taxes on money earned by two people in a single bracket in the future. Will be a killer

EnjoyIt
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Re: Roth or Traditional based on tax bracket

Post by EnjoyIt » Wed Sep 11, 2019 11:59 am

azianbob wrote:
Wed Sep 11, 2019 11:43 am
willthrill81 wrote:
Tue Sep 10, 2019 5:36 pm
rkhusky wrote:
Mon Sep 09, 2019 3:29 pm
bobbyeast wrote:
Mon Sep 09, 2019 1:54 pm
I guess the taxable account will have to cover us for those 5 years.
If you retire in the year that you turn 55 or later, you can withdraw from your current 401k penalty-free.

I favor investing in Traditional and then Roth converting in the 12% tax bracket for 15 years, the boundary of which is currently north of $100K AGI for MFJ.
:thumbsup

Once the OP believes that they are on track to have enough in tax-deferred assets to move them into the 22% bracket in retirement, I would switch to Roth contributions due to the very likely situation where surviving spouse will one day be suddenly forced into a much higher bracket due to RMDs.
Yes, this is another factor to consider for you traditionalists. Currently you are married and in a married bracket. You probably plan to be in a married bracket in retirement and doing conversions. But one spouse can die earlier than expected, meaning you lost out on paying a lower tax rate while alive but now have to pay taxes on money earned by two people in a single bracket in the future. Will be a killer
Yes, but expense will decrease significantly as well making the tax hit insignificant. Since we are talking about outlier circumstances, you could also get remarried. You can insure against this problem by purchasing a $100k-250k term life insurance policy on each of you. You can adopt a child. I'm sure I can think of more if you give me time.

Disclaimer: I am not in support of offing your loved one to cut expenses.

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Re: Roth or Traditional based on tax bracket

Post by Chip » Wed Sep 11, 2019 1:05 pm

azianbob wrote:
Wed Sep 11, 2019 11:43 am
Yes, this is another factor to consider for you traditionalists. Currently you are married and in a married bracket. You probably plan to be in a married bracket in retirement and doing conversions. But one spouse can die earlier than expected, meaning you lost out on paying a lower tax rate while alive but now have to pay taxes on money earned by two people in a single bracket in the future. Will be a killer
Of course it's a factor. And I think many of us consider that factor when deciding whether and how much to Roth contribute/convert. But rather than just a bunch of hand-waving "it will be bad", we RUN THE NUMBERS. Each situation is different. RUN THE NUMBERS. Situations change over time. RUN THE NUMBERS.

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Re: Roth or Traditional based on tax bracket

Post by azianbob » Wed Sep 11, 2019 1:52 pm

I'm just saying I do not find it likely in the future that we will be able to have an income of $345,850 and pay only 24% tax on it. I find the chances much higher that rates will rise.

That being said, I understand you guys saying it is also possible in the future that tax rates could be lower, or that you might have such low expenses that you will be able to convert the traditional balance at a lower rate before you hit 70. I can only really see that working if you either:

1. Have a low 401k balance where the growth will not exceed the conversion (but bad for retirement)
2. Have millions in cash in checking account to fund your retired life while you use all your tax space for conversions

My thought process is that if I can currently afford to pay 24% tax, and it doesn't impact my ability to contribute to the maximum allowed in tax advantaged retirement accounts, I'd rather pay the tax now and not have to worry about it in the future. Then I will be able to convert my traditional balance relatively quickly to all Roth, then I can start selling investments at the 15% LTCG rate to build up some cash reserves during market up years in retirement.

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FiveK
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Re: Roth or Traditional based on tax bracket

Post by FiveK » Wed Sep 11, 2019 2:02 pm

azianbob wrote:
Wed Sep 11, 2019 1:52 pm
I'm just saying I do not find it likely in the future that we will be able to have an income of $345,850 and pay only 24% tax on it.
If one counts IRMAA tiers above the base as taxes, in general one will be paying more than 24% tax on that income today if age 63 or older.

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Re: Roth or Traditional based on tax bracket

Post by aristotelian » Wed Sep 11, 2019 2:50 pm

I would do traditional all the way. No way you are going to be in the 24% bracket in retirement (and even if you were, the effective tax would not all be at your marginal rate). Supplement with backdoor Roth on the IRA side.

Chip
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Re: Roth or Traditional based on tax bracket

Post by Chip » Wed Sep 11, 2019 3:01 pm

azianbob wrote:
Wed Sep 11, 2019 1:52 pm
My thought process is that if I can currently afford to pay 24% tax, and it doesn't impact my ability to contribute to the maximum allowed in tax advantaged retirement accounts, I'd rather pay the tax now and not have to worry about it in the future. Then I will be able to convert my traditional balance relatively quickly to all Roth, then I can start selling investments at the 15% LTCG rate to build up some cash reserves during market up years in retirement.
It's good you have a strategy, but shouldn't you try to quantify what the strategy will cost vs. the alternatives? And how the various balances in Roth, traditional and taxable will work out? Sure you have to make some assumptions about rates of return and future tax rates, but that's what planning is all about.

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willthrill81
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Re: Roth or Traditional based on tax bracket

Post by willthrill81 » Wed Sep 11, 2019 3:10 pm

EnjoyIt wrote:
Wed Sep 11, 2019 11:59 am
azianbob wrote:
Wed Sep 11, 2019 11:43 am
willthrill81 wrote:
Tue Sep 10, 2019 5:36 pm
rkhusky wrote:
Mon Sep 09, 2019 3:29 pm
bobbyeast wrote:
Mon Sep 09, 2019 1:54 pm
I guess the taxable account will have to cover us for those 5 years.
If you retire in the year that you turn 55 or later, you can withdraw from your current 401k penalty-free.

I favor investing in Traditional and then Roth converting in the 12% tax bracket for 15 years, the boundary of which is currently north of $100K AGI for MFJ.
:thumbsup

Once the OP believes that they are on track to have enough in tax-deferred assets to move them into the 22% bracket in retirement, I would switch to Roth contributions due to the very likely situation where surviving spouse will one day be suddenly forced into a much higher bracket due to RMDs.
Yes, this is another factor to consider for you traditionalists. Currently you are married and in a married bracket. You probably plan to be in a married bracket in retirement and doing conversions. But one spouse can die earlier than expected, meaning you lost out on paying a lower tax rate while alive but now have to pay taxes on money earned by two people in a single bracket in the future. Will be a killer
Yes, but expense will decrease significantly as well making the tax hit insignificant.
Possibly, the point is that it would have been better to have less in tax-deferred accounts and more in Roth accounts in this situation from the aspect of maximizing lifetime after-tax wealth.

If you are currently in the 24% bracket, for instance, and expect to be in the 12% bracket when you make tax-deferred withdrawals, it's pretty much a slam dunk to go with tax-deferred contributions over Roth. But if you expect to be in the 22% bracket when you make withdrawals, that 2% potential tax arbitrage could easily be overwhelmed by the potential for a surviving spouse to get thrust into a much higher bracket due to RMDs for many years. As such, if there isn't a significant tax arbitrage opportunity, Roth is likely to be better at maximizing after-tax wealth.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

EnjoyIt
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Re: Roth or Traditional based on tax bracket

Post by EnjoyIt » Wed Sep 11, 2019 3:13 pm

willthrill81 wrote:
Wed Sep 11, 2019 3:10 pm
EnjoyIt wrote:
Wed Sep 11, 2019 11:59 am
azianbob wrote:
Wed Sep 11, 2019 11:43 am
willthrill81 wrote:
Tue Sep 10, 2019 5:36 pm
rkhusky wrote:
Mon Sep 09, 2019 3:29 pm


If you retire in the year that you turn 55 or later, you can withdraw from your current 401k penalty-free.

I favor investing in Traditional and then Roth converting in the 12% tax bracket for 15 years, the boundary of which is currently north of $100K AGI for MFJ.
:thumbsup

Once the OP believes that they are on track to have enough in tax-deferred assets to move them into the 22% bracket in retirement, I would switch to Roth contributions due to the very likely situation where surviving spouse will one day be suddenly forced into a much higher bracket due to RMDs.
Yes, this is another factor to consider for you traditionalists. Currently you are married and in a married bracket. You probably plan to be in a married bracket in retirement and doing conversions. But one spouse can die earlier than expected, meaning you lost out on paying a lower tax rate while alive but now have to pay taxes on money earned by two people in a single bracket in the future. Will be a killer
Yes, but expense will decrease significantly as well making the tax hit insignificant.
Possibly, the point is that it would have been better to have less in tax-deferred accounts and more in Roth accounts in this situation from the aspect of maximizing lifetime after-tax wealth.

If you are currently in the 24% bracket, for instance, and expect to be in the 12% bracket when you make tax-deferred withdrawals, it's pretty much a slam dunk to go with tax-deferred contributions over Roth. But if you expect to be in the 22% bracket when you make withdrawals, that 2% potential tax arbitrage could easily be overwhelmed by the potential for a surviving spouse to get thrust into a much higher bracket due to RMDs for many years. As such, if there isn't a significant tax arbitrage opportunity, Roth is likely to be better at maximizing after-tax wealth.
I agree. I think it is reasonable to pay a possible 2% for what you described.

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Re: Roth or Traditional based on tax bracket

Post by TomatoTomahto » Wed Sep 11, 2019 3:55 pm

Chip wrote:
Wed Sep 11, 2019 1:05 pm
azianbob wrote:
Wed Sep 11, 2019 11:43 am
Yes, this is another factor to consider for you traditionalists. Currently you are married and in a married bracket. You probably plan to be in a married bracket in retirement and doing conversions. But one spouse can die earlier than expected, meaning you lost out on paying a lower tax rate while alive but now have to pay taxes on money earned by two people in a single bracket in the future. Will be a killer
Of course it's a factor. And I think many of us consider that factor when deciding whether and how much to Roth contribute/convert. But rather than just a bunch of hand-waving "it will be bad", we RUN THE NUMBERS. Each situation is different. RUN THE NUMBERS. Situations change over time. RUN THE NUMBERS.
Of course we run the numbers, but there are many unknowns (future tax rates, my longevity, wife’s longevity, equity returns going forward, wife’s income going forward, level of pension income, each kid’s tax rate for inherited IRAs, tax changes for inherited IRAs, etc).

The best I can do is figure that by putting my wife’s contributions towards Roth 401k, we might be making a mistake of 2 or 3% (relative to the contribution). If we put those contributions to traditional, I think we might be making a 5% mistake or more.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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FiveK
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Re: Roth or Traditional based on tax bracket

Post by FiveK » Wed Sep 11, 2019 4:19 pm

aristotelian wrote:
Wed Sep 11, 2019 2:50 pm
No way you are going to be in the 24% bracket in retirement (and even if you were, the effective tax would not all be at your marginal rate).
Although the effective tax should be irrelevant to any current or future choices one might make. ;)

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Re: Roth or Traditional based on tax bracket

Post by rkhusky » Wed Sep 11, 2019 4:23 pm

azianbob wrote:
Wed Sep 11, 2019 1:52 pm
I'd rather pay the tax now and not have to worry about it in the future.
Hope the Gov't doesn't implement a wealth tax and forget to differentiate Roth and Traditional assets. Or implement a national sales tax and eliminate the income tax.

Must be nice to expect an income of $345,850 in retirement.

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TomatoTomahto
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Re: Roth or Traditional based on tax bracket

Post by TomatoTomahto » Wed Sep 11, 2019 4:41 pm

rkhusky wrote:
Wed Sep 11, 2019 4:23 pm
azianbob wrote:
Wed Sep 11, 2019 1:52 pm
I'd rather pay the tax now and not have to worry about it in the future.
Hope the Gov't doesn't implement a wealth tax and forget to differentiate Roth and Traditional assets. Or implement a national sales tax and eliminate the income tax.
Must be nice to expect an income of $345,850 in retirement.
There are many unknowns in the future; everyone pays their money and takes their chances.

But, really, why is it okay for Bogleheads to be welcoming to almost everyone, but to spill sour grape juice on those who have earned/saved enough to have significant income in retirement?
Okay, I get it; I won't be political or controversial. The Earth is flat.

EnjoyIt
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Re: Roth or Traditional based on tax bracket

Post by EnjoyIt » Wed Sep 11, 2019 4:57 pm

TomatoTomahto wrote:
Wed Sep 11, 2019 4:41 pm
rkhusky wrote:
Wed Sep 11, 2019 4:23 pm
azianbob wrote:
Wed Sep 11, 2019 1:52 pm
I'd rather pay the tax now and not have to worry about it in the future.
Hope the Gov't doesn't implement a wealth tax and forget to differentiate Roth and Traditional assets. Or implement a national sales tax and eliminate the income tax.
Must be nice to expect an income of $345,850 in retirement.
There are many unknowns in the future; everyone pays their money and takes their chances.

But, really, why is it okay for Bogleheads to be welcoming to almost everyone, but to spill sour grape juice on those who have earned/saved enough to have significant income in retirement?
I don't know the intent of that post though I wonder how likely is someone who lives and works in the 24% tax bracket have an income of $345k/yr in tax deferred space? I just don't see it happening.

aristotelian
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Re: Roth or Traditional based on tax bracket

Post by aristotelian » Wed Sep 11, 2019 5:25 pm

TomatoTomahto wrote:
Wed Sep 11, 2019 4:41 pm
rkhusky wrote:
Wed Sep 11, 2019 4:23 pm
azianbob wrote:
Wed Sep 11, 2019 1:52 pm
I'd rather pay the tax now and not have to worry about it in the future.
Hope the Gov't doesn't implement a wealth tax and forget to differentiate Roth and Traditional assets. Or implement a national sales tax and eliminate the income tax.
Must be nice to expect an income of $345,850 in retirement.
There are many unknowns in the future; everyone pays their money and takes their chances.

But, really, why is it okay for Bogleheads to be welcoming to almost everyone, but to spill sour grape juice on those who have earned/saved enough to have significant income in retirement?
His point is that it is extremely unlikely for anyone to have that kind of taxable income in retirement, even for a forum that skews wealthy.

rkhusky
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Re: Roth or Traditional based on tax bracket

Post by rkhusky » Wed Sep 11, 2019 5:33 pm

aristotelian wrote:
Wed Sep 11, 2019 5:25 pm
His point is that it is extremely unlikely for anyone to have that kind of taxable income in retirement, even for a forum that skews wealthy.
EnjoyIt wrote:
Wed Sep 11, 2019 4:57 pm
I don't know the intent of that post though I wonder how likely is someone who lives and works in the 24% tax bracket have an income of $345k/yr in tax deferred space? I just don't see it happening.
+2

H-Town
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Re: Roth or Traditional based on tax bracket

Post by H-Town » Wed Sep 11, 2019 5:50 pm

rkhusky wrote:
Wed Sep 11, 2019 4:23 pm
azianbob wrote:
Wed Sep 11, 2019 1:52 pm
I'd rather pay the tax now and not have to worry about it in the future.
Hope the Gov't doesn't implement a wealth tax and forget to differentiate Roth and Traditional assets. Or implement a national sales tax and eliminate the income tax.

Must be nice to expect an income of $345,850 in retirement.
I'll get a cold beer, sit back, and enjoy the day when the government replaces income tax with sales/VAT tax. When the senators want to make the call that would affect people's assets, you'll see they all come out to vote. All hell will break lose.

Oh... It's not a bad thing to work hard, save, and build a lot of wealth.. you know?

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