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Old 04-19-2015, 01:28 PM
 
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Quote:
Originally Posted by mathjak107 View Post
40k is the 15% bracket for a couple as an example. 75k is 25%. Do you see yourself making 75k 20 years from now ? If yes do a roth if not traditional. But in any case you can't go wrong with the roth.

You still may avoid having a lifetime of ss taxed as well as no rmd's .
But you were saying that this person will contribute to Traditional if his future salary is higher than 75k because he will compare his future salary to his projected annual retirement withdrawal.
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Old 04-19-2015, 02:35 PM
 
Location: RVA
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I understood him to say you always choose a Roth until you reach an income level where your taxes will likely be at retirement. Then there is little incentive, if you are investing, to not go Tax Deferred instead, and max that out first. That is exactly what I did, but didn't get too much of that. If you have a decent income, and are over 50 & married, have an employee sponsored 401k, & a non working spouse, you can only save $24k in a 401K and $6.5k in an IRA that is taxed deductible and deferred. After that, the next $6.5k in a Roth is the next best place to park you retirement funds, as it's also not deductible but of course all earnings are always free. That's what I've been stuck with for a few years now.
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Old 04-19-2015, 02:46 PM
 
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Quote:
Originally Posted by AmFest View Post
But you were saying that this person will contribute to Traditional if his future salary is higher than 75k because he will compare his future salary to his projected annual retirement withdrawal.
they could but odds are the roth will win regardless because so many things in retirement are income linked.

the taxes on your social security , what you pay for medicare , what you pay for part d coverage , surcharges on total income with the new medicare surcharge .

any medical insurance subsidy you get if retiring at 62 is linked ,

rmd's you take out at 70-1/2 and reinvest no longer grow tax free on gains and distributions .

roths still grow tax free forever.

there is likely even more things linked so it isn't just about your tax rate at retirement
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Old 04-19-2015, 04:27 PM
 
2,409 posts, read 2,640,099 times
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Quote:
Originally Posted by mathjak107 View Post
they could but odds are the roth will win regardless because so many things in retirement are income linked.

the taxes on your social security , what you pay for medicare , what you pay for part d coverage , surcharges on total income with the new medicare surcharge .

any medical insurance subsidy you get if retiring at 62 is linked ,

rmd's you take out at 70-1/2 and reinvest no longer grow tax free on gains and distributions .

roths still grow tax free forever.

there is likely even more things linked so it isn't just about your tax rate at retirement
So in retrospect, what would have been the cutoff income tax bracket for Roth contributions? In other words, what was the highest tax bracket at which contributing to Roth instead of Traditional would be more beneficial for you?
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Old 04-19-2015, 04:39 PM
 
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i think i would have kept doing them as long as our income allowed if we were talking about roth ira's. once we made to much money i would have to do something else.

if we are talking 401k roths i would do them until i was getting towrds the top of the 25% bracket.

now that i am retiring and see all the things hinging on income i like them a lot
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Old 04-19-2015, 05:11 PM
 
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Quote:
Originally Posted by mathjak107 View Post
i think i would have kept doing them as long as our income allowed if we were talking about roth ira's. once we made to much money i would have to do something else.

if we are talking 401k roths i would do them until i was getting towrds the top of the 25% bracket.

now that i am retiring and see all the things hinging on income i like them a lot
So 25% or lower: Roth; 28% or higher: Traditional?

No surprise really. I doubt your retirement income would hit the 28% bracket any easily.
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Old 04-19-2015, 06:00 PM
 
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Not what i said . I said if i was in the lower part of the 25% bracket i would go roth but if i was solidly in the 25% bracket i would do traditional.

No point doing a traditional if you are not even 1/2 way through the 25% bracket. Most of your income would still be in the 15% bracket.
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Old 04-20-2015, 03:49 PM
 
29,782 posts, read 34,871,258 times
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Originally Posted by LookingatFL View Post
I've been reading these threads and I had this question:

Why are we so focused on the amount in retirement accounts (i.e. 401(k), 403(b), IRA, ROTH)? Apart from tax implications, does it make any difference if the savings are in accounts that are not "retirement accounts" but will be used to fund retirement?
Yes it does make a cash available difference. 100K in a after tax account is worth more for most people then 100k in a retirement account. If you need 10K and want to take it out of a retirement account you may need to take out 12.5K or more to get to the 10K. Taking it out from your after tax account means just taking out the 10K. The dollar amounts aren't important it is the concept and the numbers are arbitrary for illustration purposes.
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Old 04-20-2015, 04:50 PM
 
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Thank you, TuborgP. I've never been sure how to answer the question of the value of my retirement accounts because I wasn't sure whether or not to include all of my accounts.
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Old 04-20-2015, 05:04 PM
 
29,782 posts, read 34,871,258 times
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Quote:
Originally Posted by LookingatFL View Post
Thank you, TuborgP. I've never been sure how to answer the question of the value of my retirement accounts because I wasn't sure whether or not to include all of my accounts.
That is a great question that has had good discussion previously. I value tax sheltered accounts at face value minus 25-30 percent. That helps account for taxes and traditional bear market corrections.
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