"For other people the RMD is a nothing burger because it does not have additional tax consequences, or the RMD is less than what they want to withdraw anyway. These last two groups are well served by NOT having an exit strategy."If you have a pre-tax account, you will ALWAYS have RMD from whatever age the law sets.I'm not playing any games with asset allocation to avoid RMDs -- I feel that I'll have plenty of time for Roth conversions between when I stop collecting a paycheck and when the IRS tells me I need to start taking RMDs. So maybe I do have an exit strategy.
But that really does not mean anything at all. The focus on this board around RMDs is because some people have RMDs larger than the amount they would otherwise prefer to take out, and they find that the required extra withdrawal has tax consequences they want to mitigate. For other people the RMD is a nothing burger because it does not have additional tax consequences, or the RMD is less than what they want to withdraw anyway. These last two groups are well served by NOT having an exit strategy.
I find this chatter from young investors about mitigating possible unwanted RMD decades in the future to be highly suspect, particularly when there are underlying assumptions about decades of as yet unrealized income and investment performance that may not come to pass. IIRC, I read the other day that around 1/3 of workers exit the workforce permanently before they wanted to due to things like ageism, poor health, injury, and economic conditions. Overwhelmingly, these people would be harmed by choosing Roth over 401k. Then there are those people who end up voluntarily retiring early. Overwhelmingly, these people are poorly served by choosing Roth over tIRA contributions during their working years. Then there are those people who actually do work until e.g. FRA, but end up with IRA accounts of say under $2M in today's money. Once again, Roth would have been a poor choice unless other income streams are present.
For every person who chooses Roth from an early age and can then say at age 70 "I made a smart choice", there are way too many who will have to say that life did not turn out as their 30 year old spreadsheet predicted.
Play the odds, and hedge your bets. I realized a long time ago that I wanted to improve my odds of at least a secure retirement, even if it meant that I reduced the odds of a rich retirement. As it turned out, I ended up with a wealthy retirement from choosing tIRA, more than had I chosen an early Roth path
If one evaluates all of their numbers and goals and finds themselves in one of these two groups then they have this as their exit strategy.
Statistics: Posted by smitcat — Fri Jul 05, 2024 8:59 am — Replies 184 — Views 26741