I am retiring later this year. I'll be 64. Like many of my peers, I dutifully saved for retirement using traditional (tax deferred) IRA and 401K. In recent years, I have (strategically) converted a fair amount to Roths. Because debts are paid off, I have also accumulated a good amount in taxable (which I now realize can be tax managed). So, after learning about asset location and tax strategies, it got me wondering... what is the value of tax deferred compared to Roth and taxable? About the only things I can think of - is having enough tax deferred saved to withdrawal a yearly amount equal to the tax deduction and kicking the tax can down the road if current taxes are high. I'd like to have a better understanding, so I can tell my 30-something children how much tax deferred to have. Is there a rule of thumb for young people?
The benefit is tax deferral
1) you can keep bonds or cash there and not pay tax in interest. You pay tax on that interest in taxable.
2) your tax rate in retirement may be lower in retirement, so you pay less tax by using tax deferred accounts
Statistics: Posted by muffins14 — Thu Feb 29, 2024 3:15 pm — Replies 28 — Views 2580