After tax contribution OR roth conversion?

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fortfun
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After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 1:04 pm

If trying to prepare for possible early retirement, is making after tax contributions now OR doing roth conversions better? I guess roth conversions would free up more money for less upfront now, is that right?

aristotelian
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Re: After tax contribution OR roth conversion?

Post by aristotelian » Mon Jan 14, 2019 1:08 pm

If you are currently in a high tax bracket, I would *not* want to do Roth conversions now. You would be better off simply paying the 10% penalty after you are retired.

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Re: After tax contribution OR roth conversion?

Post by The Wizard » Mon Jan 14, 2019 1:08 pm

Depends on your marginal tax rate now vs later.
Most of the time its not a good idea to do Roth cnversions while still working full-time...
Attempted new signature...

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Re: After tax contribution OR roth conversion?

Post by sport » Mon Jan 14, 2019 1:15 pm

Do the Roth conversions after you retire when your tax bracket is lower.

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Re: After tax contribution OR roth conversion?

Post by retiredjg » Mon Jan 14, 2019 1:20 pm

If you make enough money to even consider the after-tax contribution, you are likely in a higher tax bracket. A Roth conversion is going to tax some untaxed money and there is no need to pay a high tax rate on tax-deferred money at this point. There is a good likelihood you can do conversions later at a lower rate. This results in more money for you.

An after-tax contribution is going to be made with money that will be taxed no matter where you put it.. It will not increase your taxes. There is no harm in doing it.

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Re: After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 1:54 pm

aristotelian wrote:
Mon Jan 14, 2019 1:08 pm
If you are currently in a high tax bracket, I would *not* want to do Roth conversions now. You would be better off simply paying the 10% penalty after you are retired.
Due to so much pretax savings in 401k, 403b, 457, etc, we will probably end up mostly in the 12% tax bracket. Might actually be in a slightly higher bracket after retirement OR about the same.

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Re: After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 1:56 pm

retiredjg wrote:
Mon Jan 14, 2019 1:20 pm
If you make enough money to even consider the after-tax contribution, you are likely in a higher tax bracket. A Roth conversion is going to tax some untaxed money and there is no need to pay a high tax rate on tax-deferred money at this point. There is a good likelihood you can do conversions later at a lower rate. This results in more money for you.

An after-tax contribution is going to be made with money that will be taxed no matter where you put it.. It will not increase your taxes. There is no harm in doing it.
Thanks retiredjg. So, you are recommending just doing the after tax contribution? We will probably mostly be in 12% bracket this year. Might actually be in a bit higher bracket in retirement but not much.

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Re: After tax contribution OR roth conversion?

Post by aristotelian » Mon Jan 14, 2019 2:09 pm

fortfun wrote:
Mon Jan 14, 2019 1:54 pm
aristotelian wrote:
Mon Jan 14, 2019 1:08 pm
If you are currently in a high tax bracket, I would *not* want to do Roth conversions now. You would be better off simply paying the 10% penalty after you are retired.
Due to so much pretax savings in 401k, 403b, 457, etc, we will probably end up mostly in the 12% tax bracket. Might actually be in a slightly higher bracket after retirement OR about the same.
I tend to doubt that, but if it is true then you answered your own question. I would not convert any in the 22% bracket.

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Re: After tax contribution OR roth conversion?

Post by retiredjg » Mon Jan 14, 2019 2:23 pm

I was not actually recommending anything because there was not much information to go on. It seemed you were in a higher bracket than you are.

How much head space do you have in the 12% bracket to convert at 12%? Does it make sense to you to put $54k into tax deferral and then turn around and convert some smaller number?

What about using enough tax-deferral to get yourself down into the 12% bracket a bit and then putting the rest into Roth at 12%?

Don't know much about your situation, but I think completely filling 3 different plans is probably too much. I'd probably be putting one of those plans into Roth instead of tax-deferral. Two tax-deferred plans is enough in my book. That does not seem to be a popular suggestion around here, but I developed it after hearing several people say "I should not have saved so much in tax-deferred accounts and it is coming back to bite my you know what...."

Seems like we may have had this conversation before?

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Re: After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 2:28 pm

retiredjg wrote:
Mon Jan 14, 2019 2:23 pm
I was not actually recommending anything because there was not much information to go on. It seemed you were in a higher bracket than you are.

How much head space do you have in the 12% bracket to convert at 12%? Does it make sense to you to put $54k into tax deferral and then turn around and convert some smaller number?

What about using enough tax-deferral to get yourself down into the 12% bracket a bit and then putting the rest into Roth at 12%?

Don't know much about your situation, but I think completely filling 3 different plans is probably too much. I'd probably be putting one of those plans into Roth instead of tax-deferral. Two tax-deferred plans is enough in my book. That does not seem to be a popular suggestion around here, but I developed it after hearing several people say "I should not have saved so much in tax-deferred accounts and it is coming back to bite my you know what...."

Seems like we may have had this conversation before?
Yes, we did :) And, now, I'm not planning to do my 401k. I'm trying to decide to put that money into after tax or use it to pay taxes on the roth conversion. Thanks retiredjg.

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Re: After tax contribution OR roth conversion?

Post by retiredjg » Mon Jan 14, 2019 2:32 pm

Why not put it in Roth? Doesn't that achieve the same thing? Surely one of those 3 plans has a Roth option?

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Re: After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 2:50 pm

retiredjg wrote:
Mon Jan 14, 2019 2:32 pm
Why not put it in Roth? Doesn't that achieve the same thing? Surely one of those 3 plans has a Roth option?
The only roth is my wife's 457 which she can already access when she separates from her employer at age 52. I'll double check on this but I know my 401k does not and I don't think her 403b does either. Thanks retiredjg!

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Re: After tax contribution OR roth conversion?

Post by retiredjg » Mon Jan 14, 2019 3:05 pm

fortfun wrote:
Mon Jan 14, 2019 2:50 pm
The only roth is my wife's 457 which she can already access when she separates from her employer at age 52.
Why does that make a difference?

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Re: After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 3:14 pm

retiredjg wrote:
Mon Jan 14, 2019 3:05 pm
fortfun wrote:
Mon Jan 14, 2019 2:50 pm
The only roth is my wife's 457 which she can already access when she separates from her employer at age 52.
Why does that make a difference?
Two things:
1. Her employer's website says if she uses the roth version of the 457, the money cannot be withdrawn until 59.5. We will need it before then.
2. I'm not sure if the regular 457 alone will get us through until we can access our other retirement money. Hence, doing additional after tax or roth conversion.

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Re: After tax contribution OR roth conversion?

Post by celia » Mon Jan 14, 2019 3:29 pm

In Roth, the contributions and growth are both tax-free (after the money is in the Roth).

In After-tax, the contributions remain tax-free but the growth will be taxed later on.

So as far as which one to hold, the Roth is definitely better. Now, if your tax-deferred accounts look like they will be worth a million by the time you retire and you will have a decent pension(s) in retirement, I would definitely start doing Roth conversions since your taxes will really jump when you are taking RMD and SS along with the pension(s).

One other point that is usually overlooked, is what the stock market is currently doing. Right now the market is 12% below the October highs. That is not significant to me, but if it was at least 20 or 25% below historic highs, I would convert, even if still working and in a high tax bracket since the value of each share would be 20%+ less, meaning the taxes on the Roth conversion would be 20%+ less. (I don't mean your overall taxes, but just the taxes related to the Roth conversion part of your tax return.)
fortfun wrote:2. I'm not sure if the regular 457 alone will get us through until we can access our other retirement money. Hence, doing additional after tax or roth conversion.
Any conversions or contributions to a Roth IRA can be withdrawn at any time tax-free (since the taxes were already paid on them). The growth in the Roth IRA will be taxed and there will be an 10% penalty for withdrawing before 59.5 or the account is not 5 years old. But this applies to a Roth IRA, not a Roth <non-IRA>. So your wife could rollover the Roth 457 to a Roth IRA after she stops working and you could withdraw from the Roth IRA soon after.

Therefore, you need to have good records for all the amounts you've ever contributed or converted to Roth IRAs.

It also sounds like you and your wife need to open a Roth IRA this year (actually several years ago) with at least a token amount of money in it to get the 5-year clock ticking. If your income is very high, have you ever considered a Backdoor Roth?
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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Re: After tax contribution OR roth conversion?

Post by retiredjg » Mon Jan 14, 2019 3:44 pm

fortfun wrote:
Mon Jan 14, 2019 3:14 pm
1. Her employer's website says if she uses the roth version of the 457, the money cannot be withdrawn until 59.5. We will need it before then.
That's pretty much unexpected and makes no sense at all, at least not to me. Spirit Rider, are you around?

2. I'm not sure if the regular 457 alone will get us through until we can access our other retirement money. Hence, doing additional after tax or roth conversion.
Even if the Roth/59.5 thing is some kind of misunderstanding, this indicates that you will need more money than can be stuffed into the 457b anyway, Roth or traditional.

If you start putting $18k into a taxable account now (at 22%) instead of into His 401k, that will be money to tide you over in your pre 59.5 years. That seems reasonable.

Or you can start doing Roth conversions now, at 22%, and that first conversion money will be available penalty free in 5 tax years. That seems reasonable too if you have the money outside the conversion to pay the taxes on the conversion.

Or we can go back to my original question of how much head space is available at 12% if you fill all 3 tax deferred accounts? Would conversions of that amount take care of your needs from retirement to 59.5? If yes, do you have outside money to pay the taxes?

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Re: After tax contribution OR roth conversion?

Post by aristotelian » Mon Jan 14, 2019 3:47 pm

celia wrote:
Mon Jan 14, 2019 3:29 pm
In Roth, the contributions and growth are both tax-free (after the money is in the Roth).

In After-tax, the contributions remain tax-free but the growth will be taxed later on.

So as far as which one to hold, the Roth is definitely better. Now, if your tax-deferred accounts look like they will be worth a million by the time you retire and you will have a decent pension(s) in retirement, I would definitely start doing Roth conversions since your taxes will really jump when you are taking RMD and SS along with the pension(s).
He says he is trying to prepare for possible early retirement. If he is retiring at 61, I would agree with you. If he is retiring at 40, I would not have any concern about RMD's. I would be hesitant to recommend Roth conversions in the 22% bracket without more information.

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Re: After tax contribution OR roth conversion?

Post by celia » Mon Jan 14, 2019 3:49 pm

retiredjg wrote:
Mon Jan 14, 2019 3:44 pm
fortfun wrote:
Mon Jan 14, 2019 3:14 pm
1. Her employer's website says if she uses the roth version of the 457, the money cannot be withdrawn until 59.5. We will need it before then.
That's pretty much unexpected and makes no sense at all, at least not to me. Spirit Rider, are you around?
I can confirm that I have seen that before. A relative had to stop working before 59.5 and he couldn't rollover his 401K or withdraw from it until he was 59.5.
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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Re: After tax contribution OR roth conversion?

Post by celia » Mon Jan 14, 2019 3:56 pm

aristotelian wrote:
Mon Jan 14, 2019 3:47 pm
He says he is trying to prepare for possible early retirement. If he is retiring at 61, I would agree with you. If he is retiring at 40, I would not have any concern about RMD's. I would be hesitant to recommend Roth conversions in the 22% bracket without more information.
Even if he is retiring at 40, that would even be scarier to me since he has so much more time for the tax-deferred accounts to grow, assuming he doesn't withdraw too much from them. Remember, the more you are able to save when you are young, the more time you have for compounding to work. And when you are young, you can take more risk (100% stocks) since you have time to recover, should something go wrong.
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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Re: After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 4:06 pm

celia wrote:
Mon Jan 14, 2019 3:56 pm
aristotelian wrote:
Mon Jan 14, 2019 3:47 pm
He says he is trying to prepare for possible early retirement. If he is retiring at 61, I would agree with you. If he is retiring at 40, I would not have any concern about RMD's. I would be hesitant to recommend Roth conversions in the 22% bracket without more information.
Even if he is retiring at 40, that would even be scarier to me since he has so much more time for the tax-deferred accounts to grow, assuming he doesn't withdraw too much from them. Remember, the more you are able to save when you are young, the more time you have for compounding to work. And when you are young, you can take more risk (100% stocks) since you have time to recover, should something go wrong.
Current ages (45 &47). Possible early retirement ages (50 & 52). Pension (68k/yr till both die, will cover living expenses). Savings $1M+ will cover travel, misc expenses. No SS for him, little SS for her. Much of the savings will be tied up in accounts that can't be accessed till 59.5. However, we should each have about 60k in Roth IRAs and we should each have about 100k in 457s.
Last edited by fortfun on Mon Jan 14, 2019 4:07 pm, edited 1 time in total.

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Re: After tax contribution OR roth conversion?

Post by retiredjg » Mon Jan 14, 2019 4:07 pm

celia wrote:
Mon Jan 14, 2019 3:49 pm
retiredjg wrote:
Mon Jan 14, 2019 3:44 pm
fortfun wrote:
Mon Jan 14, 2019 3:14 pm
1. Her employer's website says if she uses the roth version of the 457, the money cannot be withdrawn until 59.5. We will need it before then.
That's pretty much unexpected and makes no sense at all, at least not to me. Spirit Rider, are you around?
I can confirm that I have seen that before. A relative had to stop working before 59.5 and he couldn't rollover his 401K or withdraw from it until he was 59.5.
Except we are not talking about 401k.:happy

The discussion is about 457 which does not have an age 59.5 requirement that I know of.

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Re: After tax contribution OR roth conversion?

Post by retiredjg » Mon Jan 14, 2019 4:12 pm

fortfun wrote:
Mon Jan 14, 2019 4:06 pm
Pension (68k/yr till both die, will cover living expenses).
Does this start at 50/52?

However, we should each have about 60k in Roth IRAs and we should each have about 100k in 457s.
Are you the couple who has 2 401ks, 2 403bs, and 2 457bs? If yes, are you telling me that none of those 6 accounts has a Roth version? How many of these have you been filling up?

Is there a Roth IRA already started for either of you?
Last edited by retiredjg on Mon Jan 14, 2019 4:13 pm, edited 1 time in total.

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Re: After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 4:13 pm

retiredjg wrote:
Mon Jan 14, 2019 4:07 pm
celia wrote:
Mon Jan 14, 2019 3:49 pm
retiredjg wrote:
Mon Jan 14, 2019 3:44 pm
fortfun wrote:
Mon Jan 14, 2019 3:14 pm
1. Her employer's website says if she uses the roth version of the 457, the money cannot be withdrawn until 59.5. We will need it before then.
That's pretty much unexpected and makes no sense at all, at least not to me. Spirit Rider, are you around?
I can confirm that I have seen that before. A relative had to stop working before 59.5 and he couldn't rollover his 401K or withdraw from it until he was 59.5.
Except we are not talking about 401k.:happy

The discussion is about 457 which does not have an age 59.5 requirement that I know of.
DW must have been mistaken. It appears you can withdraw roth 457 at separation. You agree?
https://www.copera.org/sites/default/fi ... /14-71.pdf

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Re: After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 4:15 pm

retiredjg wrote:
Mon Jan 14, 2019 4:12 pm
fortfun wrote:
Mon Jan 14, 2019 4:06 pm
Pension (68k/yr till both die, will cover living expenses).
Does this start at 50/52?
----Yes.

However, we should each have about 60k in Roth IRAs and we should each have about 100k in 457s.
Are you the couple who has 2 401ks, 2 403bs, and 2 457bs? If yes, are you telling me that none of those 6 accounts has a Roth version? How many of these have you been filling up?
---2 457s (hers has roth option). Her 403b. Him 401k. We have been maxing 3 of 4 the past year only.

Is there a Roth IRA already started for either of you?
----We've had regular Roth IRAs for the past 5 years.

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Re: After tax contribution OR roth conversion?

Post by retiredjg » Mon Jan 14, 2019 4:16 pm

fortfun wrote:
Mon Jan 14, 2019 4:13 pm
DW must have been mistaken. It appears you can withdraw roth 457 at separation. You agree?
https://www.copera.org/sites/default/fi ... /14-71.pdf
Yes, that is what it says to me.

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Re: After tax contribution OR roth conversion?

Post by aristotelian » Mon Jan 14, 2019 4:17 pm

celia wrote:
Mon Jan 14, 2019 3:56 pm
Even if he is retiring at 40, that would even be scarier to me since he has so much more time for the tax-deferred accounts to grow, assuming he doesn't withdraw too much from them. Remember, the more you are able to save when you are young, the more time you have for compounding to work. And when you are young, you can take more risk (100% stocks) since you have time to recover, should something go wrong.
He could make the majority of his 401k bonds to keep it from growing too fast. He could then convert nearly $100K per year at 12% and under. At age 40, he would have 30 years to draw down the 401k before SS and forced RMDs. He would need to have at least $1.2M in the 401k before market gains would outstrip his withdrawals. Before making any recommendations, I would like to know his age, length of early retirement, and size of 401k.

Also remember that he could have a 22% marginal rate in retirement but still convert a lot of his 401k at lower effective rates.

Generally, I would incline against conversions in his current tax bracket, as most people fall in a lower tax bracket in retirement, and particularly early retirees.

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Re: After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 4:27 pm

aristotelian wrote:
Mon Jan 14, 2019 4:17 pm
celia wrote:
Mon Jan 14, 2019 3:56 pm
Even if he is retiring at 40, that would even be scarier to me since he has so much more time for the tax-deferred accounts to grow, assuming he doesn't withdraw too much from them. Remember, the more you are able to save when you are young, the more time you have for compounding to work. And when you are young, you can take more risk (100% stocks) since you have time to recover, should something go wrong.
He could make the majority of his 401k bonds to keep it from growing too fast. He could then convert nearly $100K per year at 12% and under. At age 40, he would have 30 years to draw down the 401k before SS and forced RMDs. He would need to have at least $1.2M in the 401k before market gains would outstrip his withdrawals. Before making any recommendations, I would like to know his age, length of early retirement, and size of 401k.

Also remember that he could have a 22% marginal rate in retirement but still convert a lot of his 401k at lower effective rates.

Generally, I would incline against conversions in his current tax bracket, as most people fall in a lower tax bracket in retirement, and particularly early retirees.
Current ages (45 &47). Possible early retirement ages (50 & 52). Pension (68k/yr till both die, will cover living expenses). Savings $1M+ will cover travel, misc expenses. No SS for him, little SS for her. Much of the savings will be tied up in accounts that can't be accessed till 59.5. However, we should each have about 60k in Roth IRAs and we should each have about 100k in 457s.

Current tax bracket 12% (I believe). Total take home in retirement: 100k-110k.

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Re: After tax contribution OR roth conversion?

Post by retiredjg » Mon Jan 14, 2019 4:33 pm

fortfun wrote:
Mon Jan 14, 2019 4:06 pm
Current ages (45 &47). Possible early retirement ages (50 & 52). Pension (68k/yr till both die, will cover living expenses).
Your problem is going to be that $68k will not be worth much 40 years after you retire and each of you could live that long. Any possibility of a COLA on the pension(s)?

Savings $1M+ will cover travel, misc expenses
Does this $1M exist today or is that what you expect to have when you retire?



Other than the question of whether there will be enough money....it seems to me you have two issues to work out.

1) Where to put money to use prior to age 59.5.
What if you fill His 457 (traditional), Her 457 (Roth) and one of the 401k/403b....will that be enough to last until 59.5?

If not, what if you fill His 457 (traditional), Her 457 (traditional) and put the 401k/403b money into a taxable account?



2) How much to put into tax deferral?
If you retire that early, the problem of having put too much into tax-deferral is not very important for you because you will have many years to convert from traditional to Roth. Nevertheless, it makes no sense to me to fill 3 tax-deferred accounts if there will not be enough money to get through to 59.5.

I suppose some people believe it is better to defer while at 22% and pay both tax and a penalty on what you take money out of IRA early. I'm going to have to sleep on that one. But if you take money out at 12% and pay a 10% penalty you have not accomplished anything. If you take out at 15% and pay a 10% penalty, you will have paid more by using that method. Or I may not be thinking this through enough.

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Re: After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 4:42 pm

retiredjg wrote:
Mon Jan 14, 2019 4:33 pm
fortfun wrote:
Mon Jan 14, 2019 4:06 pm
Current ages (45 &47). Possible early retirement ages (50 & 52). Pension (68k/yr till both die, will cover living expenses).
Your problem is going to be that $68k will not be worth much 40 years after you retire and each of you could live that long. Any possibility of a COLA on the pension(s)?
---Well, it started at 3%, got dropped to 2%, and is currently at 1.5%. I'm not holding my breath but they made some huge adjustments that might keep it at 1.5% I guess I shouldn't count on it.

Savings $1M+ will cover travel, misc expenses
Does this $1M exist today or is that what you expect to have when you retire?
-----Currently 700k+. Adding 85k+/yr for next 5 years. Approx 60/40 allocation.



Other than the question of whether there will be enough money....it seems to me you have two issues to work out.
----We are willing to work longer but like the idea of being able to call it quits if we want.

1) Where to put money to use prior to age 59.5.
What if you fill His 457 (traditional), Her 457 (Roth) and one of the 401k/403b....will that be enough to last until 59.5?
----I think so with the regular roth IRAs.

If not, what if you fill His 457 (traditional), Her 457 (traditional) and put the 401k/403b money into a taxable account?
----I think we will continue to put 18k/yr into after tax just to be safe.



2) How much to put into tax deferral?
If you retire that early, the problem of having put too much into tax-deferral is not very important for you because you will have many years to convert from traditional to Roth. Nevertheless, it makes no sense to me to fill 3 tax-deferred accounts if there will not be enough money to get through to 59.5.
-----Right and that's why I'm trying to nail this down precisely.

I suppose some people believe it is better to defer while at 22% and pay both tax and a penalty on what you take money out of IRA early. I'm going to have to sleep on that one. But if you take money out at 12% and pay a 10% penalty you have not accomplished anything. If you take out at 15% and pay a 10% penalty, you will have paid more by using that method. Or I may not be thinking this through enough.
(See answers above).
Thanks retiredjg. I will try to share our updated numbers with you/the group this weekend. I appreciate your help!

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Re: After tax contribution OR roth conversion?

Post by retiredjg » Mon Jan 14, 2019 4:49 pm

It would be nice to see all the data in one place.

Since this is an early retirement and since you need the 457b money to live on in the first several years, I'm coming around to thinking that filling 3 accounts (including two 457bs) with traditional contributions is reasonable for your situation.

If that brings you into the 12% bracket and if you can convert anything at all at 12%, then conversion seems like a good plan to me. I assume you would fill 2 Roth IRAs at 12% before doing Roth conversions.

But let's look at it all together instead of just piecing things together. It might look different.

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Re: After tax contribution OR roth conversion?

Post by fortfun » Mon Jan 14, 2019 4:58 pm

retiredjg wrote:
Mon Jan 14, 2019 4:49 pm
It would be nice to see all the data in one place.

Since this is an early retirement and since you need the 457b money to live on in the first several years, I'm coming around to thinking that filling 3 accounts (including two 457bs) with traditional contributions is reasonable for your situation.

If that brings you into the 12% bracket and if you can convert anything at all at 12%, then conversion seems like a good plan to me. I assume you would fill 2 Roth IRAs at 12% before doing Roth conversions.

But let's look at it all together instead of just piecing things together. It might look different.
I'll start getting our new numbers together tonight. Unfortunately, they dropped a bit since October but not horrible. Thanks again for your help!

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Re: After tax contribution OR roth conversion?

Post by aristotelian » Mon Jan 14, 2019 6:06 pm

fortfun wrote:
Mon Jan 14, 2019 4:27 pm
aristotelian wrote:
Mon Jan 14, 2019 4:17 pm
celia wrote:
Mon Jan 14, 2019 3:56 pm
Even if he is retiring at 40, that would even be scarier to me since he has so much more time for the tax-deferred accounts to grow, assuming he doesn't withdraw too much from them. Remember, the more you are able to save when you are young, the more time you have for compounding to work. And when you are young, you can take more risk (100% stocks) since you have time to recover, should something go wrong.
He could make the majority of his 401k bonds to keep it from growing too fast. He could then convert nearly $100K per year at 12% and under. At age 40, he would have 30 years to draw down the 401k before SS and forced RMDs. He would need to have at least $1.2M in the 401k before market gains would outstrip his withdrawals. Before making any recommendations, I would like to know his age, length of early retirement, and size of 401k.

Also remember that he could have a 22% marginal rate in retirement but still convert a lot of his 401k at lower effective rates.

Generally, I would incline against conversions in his current tax bracket, as most people fall in a lower tax bracket in retirement, and particularly early retirees.
Current ages (45 &47). Possible early retirement ages (50 & 52). Pension (68k/yr till both die, will cover living expenses). Savings $1M+ will cover travel, misc expenses. No SS for him, little SS for her. Much of the savings will be tied up in accounts that can't be accessed till 59.5. However, we should each have about 60k in Roth IRAs and we should each have about 100k in 457s.

Current tax bracket 12% (I believe). Total take home in retirement: 100k-110k.
How much of the savings is pretax? All of it?

When does the pension kick in?

Sounds like you will have at least 10 years where you will be able to do conversions on any pretax funds. That said, the pension taking up most of your low tax bracket, combined with the lack of liquidity, makes this a very complex question. Whenever I am in doubt my approach is a little of each on the principle of diversification.

You might want to look into SEPP withdrawal plan. That would allow you avoid penalties on early withdrawals without having to build a Roth ladder.

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