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Old 02-14-2019, 06:42 AM
 
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53 years old, self employed, no pension. I have been putting away money steadily in a SEP IRA. I now have a 5:1:1 ratio of tax deferred to Roth to taxable savings.
I know it sounds strange, but I am wondering if I have too much in tax deferred savings? Was wondering if I should hold off on SEP IRA contributions, take the tax hit, and put it in taxable savings? Or am I just overanalyzing this?
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Old 02-14-2019, 10:52 AM
 
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I have had a very small Roth for years. It’s just under 20k right now. Everything else is in a deferred income account. When I found out that our new retirement plan at work had a Roth option, I thought I should start doing a 50/50. Then I did some research and learned more about it. At my age, I believe I am better off putting the full amount in and earning income on it. I don’t have that many years until retirement, and I really think my tax bracket will be the same.

The younger you are, the more a Roth will benefit you.
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Old 02-14-2019, 01:10 PM
 
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Quote:
Originally Posted by ChessieMom View Post
The younger you are, the more a Roth will benefit you.

Can you please elaborate on that? Is it because taxes are likely to be higher in far future?
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Old 02-14-2019, 02:24 PM
 
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Quote:
Originally Posted by Bp25 View Post
Can you please elaborate on that? Is it because taxes are likely to be higher in far future?
That, and because you have more time for that money to grow and make up for the difference.
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Old 02-14-2019, 08:54 PM
 
Location: SoCal
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It depends on the size of your IRA. It’s hard to answer without knowing.
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Old 02-16-2019, 03:07 AM
 
Location: minnesota
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Roth is a tax treatment. Is what you are asking is if you will be in a higher or lower marginal tax rate when you retire. That's going to require some speculation but you need to know what your marginal tax rate is now. Then try and calculate your post retirement income and see where you fall. Then you have to try and figure out if those tax rates will change.
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Old 02-16-2019, 05:03 AM
 
Location: Thailand
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There are too many variables to know what's best for you (your tax rate, your expected draw in retirement, etc.) and obviously you shouldn't share details on here, but generally you should max out the Roth first, then the tax deferred savings, then taxable accounts.

It'll leave you a lot less flexibility on tax avoidance in retirement but after the Roth it's hard to beat tax deferred since all the dollars are being stashed at your highest bracket but will be withdrawn later spread across tiers all including the 0% exemption. For that reason even if tax rates are higher in the future you'll still usually pay lower tax bill when withdrawing from tax deferred as regular income.
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Old 02-16-2019, 09:36 AM
 
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There is an online calculator ( I’ll have to look for the link) where you can enter the numbers in...how many years to retirement, expected tax rate, etc. It will show you the difference in a a Roth investment vs a tax-deferred. For me, tax-deferred won.
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Old 02-18-2019, 06:46 PM
 
Location: The South
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Quote:
Originally Posted by NSHL10 View Post
53 years old, self employed, no pension. I have been putting away money steadily in a SEP IRA. I now have a 5:1:1 ratio of tax deferred to Roth to taxable savings.
I know it sounds strange, but I am wondering if I have too much in tax deferred savings? Was wondering if I should hold off on SEP IRA contributions, take the tax hit, and put it in taxable savings? Or am I just overanalyzing this?
I have been making RMD's from my IRA for 11 years. I wish I had converted everything to a Roth. The tax bite is beginning to hurt. I would put everything in a Roth.
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Old 02-18-2019, 07:07 PM
 
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Quote:
Originally Posted by Southern man View Post
I have been making RMD's from my IRA for 11 years. I wish I had converted everything to a Roth. The tax bite is beginning to hurt. I would put everything in a Roth.


Are you in a different tax bracket now than you were before retiring?
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