U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 04-21-2015, 05:31 AM
 
Location: RVA
2,164 posts, read 1,265,106 times
Reputation: 4451

Advertisements

That IS a good point. Having $500k in retirement savings all in a tax deferred 401k is worth $50k less than the same account where $200k of it is in a Roth. I KNOW that also means that the Roth person should theoretically have $550000.
Reply With Quote Quick reply to this message

 
Old 04-21-2015, 06:11 AM
 
Location: Mount Airy, Maryland
10,459 posts, read 5,922,719 times
Reputation: 16151
Quote:
Originally Posted by Perryinva View Post
That IS a good point. Having $500k in retirement savings all in a tax deferred 401k is worth $50k less than the same account where $200k of it is in a Roth. I KNOW that also means that the Roth person should theoretically have $550000.

Yes but keep in mind if you are talking about a 401 you will be contributing more on a weekly basis with a traditional over a Roth, obviously. So at the end of the line your balance will be significantly higher with a traditional 401 over a Roth.
Reply With Quote Quick reply to this message
 
Old 04-22-2015, 05:27 AM
 
Location: RVA
2,164 posts, read 1,265,106 times
Reputation: 4451
Yes, thats why I said, theoretically, the Roth person would have maybe $550000, actually, much less if he made the contributions to the Roth at a lower than 25% effective rate, which would be typical, all things being equal, if he had contributed what he did on the Roth, to a 401k.

However, I know if I had to choose between the two at age 65, say $540k in a 401k or $300k in a 401k with an additional $200k in a Roth, I'd choose the Roth every time. While you only lose $10k in taxes on the $40k extra, it doesn't take long in tax savings to recover the other $30k if you have a high fixed income due to pensions and other after tax income, by lowering your RMDs that could bump you into higher brackets, of if you make a large cash purchase. Plus its the better of the two to leave as inheritance if thats important to you. Ive run those type numbers in RIP, and with a Roth, it always wins rather handily.
Reply With Quote Quick reply to this message
 
Old 04-22-2015, 06:07 AM
 
Location: Mount Airy, Maryland
10,459 posts, read 5,922,719 times
Reputation: 16151
I still go back to the gains growing tax free with a Roth. That is a huge advantage. In fact I am slowly converting money from my traditional brokerage account to Roths. A few thousand a year only gives me a small tax bite at the time of the conversion, then it grows tax free forever (or until I tap it).
Reply With Quote Quick reply to this message
 
Old 04-22-2015, 04:03 PM
 
29,774 posts, read 34,856,103 times
Reputation: 11687
Quote:
Originally Posted by DaveinMtAiry View Post
I still go back to the gains growing tax free with a Roth. That is a huge advantage. In fact I am slowly converting money from my traditional brokerage account to Roths. A few thousand a year only gives me a small tax bite at the time of the conversion, then it grows tax free forever (or until I tap it).
I am finding with myself and some others that the living in retirement mindset can be different than planning would have made you think.
Reply With Quote Quick reply to this message
 
Old 04-22-2015, 04:05 PM
 
29,774 posts, read 34,856,103 times
Reputation: 11687
Once you retire you really have no retirement account just bigger savings and investments. The only real issue is tax rates etc.
Reply With Quote Quick reply to this message
 
Old 04-22-2015, 04:31 PM
 
Location: Wisconsin
21,535 posts, read 43,982,964 times
Reputation: 15135
Quote:
Originally Posted by DaveinMtAiry View Post
I am slowly converting money from my traditional brokerage account to Roths. A few thousand a year only gives me a small tax bite at the time of the conversion, then it grows tax free forever (or until I tap it).
Me, too - doing the same. Roths were of no value to me when I worked, tax savings much more important. Tax bracket in retirement lower than when I worked. However, now, Roths will be very useful in future as I age and RMDs increase, not to mention leaving tax-free money to heirs.
Reply With Quote Quick reply to this message
 
Old 04-22-2015, 04:43 PM
 
71,511 posts, read 71,674,131 times
Reputation: 49088
not to mention that for some having roths can mean a lifetime of tax free social security while drawiing pretty large incomes.

for those retiring at 62 medical insurance subsidy is possible .

that to me is what is can be all about.
Reply With Quote Quick reply to this message
 
Old 04-23-2015, 04:11 PM
 
Location: RVA
2,164 posts, read 1,265,106 times
Reputation: 4451
Now that its WAY too late, I can easily conceive of a scenario where I made the wrong choice of employer. I work for a large electric utility, that has always had great benefits, but average or slightly lower, salary., but also stellar security. I've always been conservative money wise, so while many of my engineer friends went the more risky high income route, and were the most part successful, I went the more sure fire route. Now I see that while I always thought our non contributory pension, which when fully accrued is 55% of our highest 5 year average out of last 10 salary, more than compensated for the reduced salary in the long run, that because that forces me to always have to pay tax on 85% of my SS, that instead, having a higher salary, with no pension, and purchasing after tax vehicles for low income or having a very large Roth, could be more advantageous. I'm not complaining at all. When I started working, there were no 401ks, IRAs and Roths were 25 years in the future, so impossible to plan around that. When i started working, SS was not indexed for inflation. And the checks always seemed pitifully small, so would never be a major source of income or taxes. Thats all changed. At FRA, our minimum income will be just over $120k, including about $58k in SS, all 85% taxed at 25%. So I will always start off with over 12k in taxes to begin. And go up from there as I withdraw RMDs. So instead of a taxed pension of $60k, where i will pay another $15k in taxes, all I needed was a tax free income of $33k to break even!!! Naturally,mto plan for that in the past is fairly difficult if not impossible, but if I had a $1M Roth, it would be easy. Literally, until I joined this forum a month ago, this never occured to me, nor had I ever read about it. Like I said, I am extremely grateful for what I have and achieved, but I think many of my friends were much smarter, financially, or just a whole lot luckier.
Reply With Quote Quick reply to this message
 
Old 04-23-2015, 06:37 PM
 
Location: Wisconsin
21,535 posts, read 43,982,964 times
Reputation: 15135
Quote:
Originally Posted by Perryinva View Post
Now that its WAY too late, I can easily conceive of a scenario where I made the wrong choice of employer. I work for a large electric utility, that has always had great benefits, but average or slightly lower, salary., but also stellar security. I've always been conservative money wise, so while many of my engineer friends went the more risky high income route, and were the most part successful, I went the more sure fire route.

Like I said, I am extremely grateful for what I have and achieved, but I think many of my friends were much smarter, financially, or just a whole lot luckier.
They also had a whole lot more stress and less job security. I had a relative engineer for GM - his coworkers were transferred numerous times over the years. He resisted, but finally had to relent and was forced to leave WI for Michigan. Now retired in the Rochester area. Left his and his wife's entire family to do the move - and they were not happy about it. His eldest son still wants to move back, although he is a high school teacher with a Masters Degree, doing well, and son's wife also now works at GM - very overpaid, imo. Economically they are doing much better in Rochester than they would be here, for sure. So, the kids are benefitting, at least for now.

All that said, given my experience in the private sector, I would choose the "sure thing" over the riskier route any day. Utilities aren't the govt, but the next best thing for job security and stability. Unlikely a utility company would require you relocate. And, they won't deprive of your retirement benefit either, which was my experience.

Paying too much in taxes is a good problem to have. Consider doing Roth conversions to the limit of your tax bracket - which will help to keep the RMDs down in future, avoid/mitigate bracket creep - and leave (more) tax-free money to heirs.

You're in a good place.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top