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Old 01-31-2017, 08:36 AM
 
Location: Columbia SC
8,980 posts, read 7,753,935 times
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I was taught to defer taxes as long as possible. When younger and used itemized deductions, I opted for IRA's versus ROTH's. I am now taking RMD's on my IRA and will have to pay tax but even knowing what I know today, I would have done the same.
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Old 01-31-2017, 09:03 AM
 
71,662 posts, read 71,801,099 times
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unless you are in the highest brackets starting out in your career roths win hands down .

your pay will be ramping up for many years , maybe decades . your career average will likely be far below your final years down the road since it is based on so many lower years .

all those dollars you wrote off at lower brackets will be wasted when you are taxed at higher brackets later .


folks tend to make the mistake of comparing their final years and comparing that to retirement . that is a mistake since retirement income tends to fall out in the range of the final years pay . it is really all about your career average tax bracket not the final years

Last edited by mathjak107; 01-31-2017 at 09:14 AM..
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Old 01-31-2017, 09:55 AM
 
Location: Omaha, Nebraska
7,319 posts, read 4,167,038 times
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Quote:
Originally Posted by goodlife36 View Post
This sounds very complicated.
It sounds more complicated than it is. The fine folks at Vanguard or Fidelity will walk you through the process step-by-step.
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Old 01-31-2017, 11:33 AM
 
71,662 posts, read 71,801,099 times
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many financial people run on old myths . i have yet to see any planner talk about the life time averages and the importance of starting roths early .

they all make the classic mistake of looking the final years brackets
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Old 02-02-2017, 08:00 PM
Status: "Gaining Stability." (set 14 days ago)
 
5,685 posts, read 5,939,305 times
Reputation: 4432
I called Vanguard and the guy explained the difference between Roth and a traditional IRA. I've decided to open up a Roth. Did you know the cap for both the traditional IRA and Roth is $5500 per year? The expense ratio is .16. Someone said their customer service is not very good. I was very pleased with the gentlemen I spoke to. The second one not so much. That is the way it goes. I am going to transfer over the money in my Star Fund and the couple of retirement accounts I have.
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Old 02-02-2017, 08:48 PM
 
Location: SoCal
13,237 posts, read 6,345,210 times
Reputation: 9854
Quote:
Originally Posted by johngolf View Post
I was taught to defer taxes as long as possible. When younger and used itemized deductions, I opted for IRA's versus ROTH's. I am now taking RMD's on my IRA and will have to pay tax but even knowing what I know today, I would have done the same.
I'm with you. My husband and I paid 36% for federal and 9% for state so IRA was correct instrument for us. Now I'm taking it out and I think I will pay less than 7% on a large amount spreading over a few years. I'm grateful. Let those who want to pay more taxes do it, I'm aversion to pay any more taxes. I'm part of the moochers class now.

Last edited by NewbieHere; 02-02-2017 at 08:58 PM..
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Old 02-03-2017, 01:54 AM
 
14,261 posts, read 24,004,620 times
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Quote:
Originally Posted by NewbieHere View Post
Vanguard has terrible customer service, just be aware. That's what you pay for the low fee. I have them so I know.
I have been with Vanguard 25+ years and never had bad service once.
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Old 02-03-2017, 04:59 AM
Status: "Gaining Stability." (set 14 days ago)
 
5,685 posts, read 5,939,305 times
Reputation: 4432
I am a little confused about taxes. The traditional IRA is attractive because of the tax deduction and that people generally are in a lower tax bracket when they retire. I am currently in the 25% tax bracket ($37,650- $91,150). The range is pretty wide. I anticipate I will be in the same tax bracket when I reach retirement age. Isn't the tax bracket determined by aggregate income? What am I missing?
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Old 02-03-2017, 05:09 AM
 
71,662 posts, read 71,801,099 times
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yes aggregate income . that is why good tax planning is needed .

strategy's like delaying ss and drawing out ira money at zero tax if 22k or less or at only 4.50% tax on up to 40k from an ira .

you can maybe utilize zero capital gains brackets in a brokerage account while delaying .

add some roth income and you can have a 100k plus income and pay very very low taxes , get aca subsidy's , etc .

plan poorly and you will pay the same tax rate and get no benefits.

most foilks get it wrong anyway . their long time average tax bracket over a 30 year or 40 year career that ramps up from very low to their final years will likely have them in a higher tax bracket at retirement than their long term average bracket spanning their working years . a roth would win hands down if that is the case

Last edited by mathjak107; 02-03-2017 at 05:17 AM..
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Old 02-03-2017, 07:57 AM
 
Location: SoCal
13,237 posts, read 6,345,210 times
Reputation: 9854
Quote:
Originally Posted by jlawrence01 View Post
I have been with Vanguard 25+ years and never had bad service once.
They made lots of mistakes is a better way to clarify the situation. They told me one thing and did the opposite. Of course, there is nothing wrong with their customer service, but the quality and the accuracy of their actions were really bad.
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