Don’t count your chickens before they hatch. A lot can happen between 47 and 67.I'm 47, in the 22% tax bracket MFJ, current retirement assets in the (very) low 7 digits.
My employer offers a 401(k) with matching contributions, the employer match is always tax-deferred.
My current holdings are roughly 43% tax-deferred, 19% tax free (Roth), and 38% taxable.
I am currently maxing out my (and my spouse's) Roth IRAs, my HSA and 401(k). My contributions to the 401(k) are split roughly equally between the tax-deferred and the tax-free Roth 401(k).
I would absolutely enjoy the lower tax burden of deferring the entire 401(k), but I also look around and don't see how taxes won't be higher in the future. As such, I have decided I wanted to have flexibility between "buckets" to draw income from, and since my "tax-free" bucket is smallest, I am biasing a little towards boosting it up.
I guess one argument is that I should defer the entire 401(k), and then when I retire, live off the taxable account for a few years and convert the tax-deferred as much as possible to Roth while I have minimal income and am in the lowest tax brackets. Is that the prevailing wisdom? What would you do/are you doing?
Thanks for any insight!
I would just keep contributing to pre-tax-401k, Roth IRA and HSA as long as in 22% bracket. When you have more than 2M in 401k then revisit the question. As an example, one might decide or forced to retire when 60 year old. You can withdraw from 60 to 70 in lower tax bracket of 12-15% before SS starts. Note age 65+ taxes are slightly lower due to higher standard deduction.
You will be in higher bracket than 22% if your annual income is 230k+. What is the probability of that?
If you are that lucky to be withdrawing 230k+ in retirement then that is good a problem to have instead of being unlucky and paying higher taxes now than necessary.
Statistics: Posted by babystep — Sun May 26, 2024 12:07 am — Replies 8 — Views 670