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Old 06-06-2019, 03:33 AM
 
Location: Las Vegas & San Diego
188 posts, read 31,194 times
Reputation: 177

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Quote:
Originally Posted by mathjak107 View Post
irrelevant , whether you pay the taxes up front or after it has the same effect if gains and taxes stay the same .

if you even up the dollars then the net balances are identical if tax rates are the same .

like i keep showing you people , you need to use 6400.00 in pretax dollars to convert to a roth and get 5k in the roth in the 22% bracket ...

even if the roth doubles tax free that is 10k ....


if the 6400 doubles in a traditional it is 12,800... less the same 22% tax is 10k

people like to calculate by paying the taxes up front from money outside the retirement plan with a roth , yet they insist on calculating paying the taxes with money from inside the retirement plan with the traditional . that is flawed math. the tax free growth brings nothing to the party when you compare apples to apples because the growth is on a reduced amount from the conversion on .
Doesn't matter - a lot of other things can be much higher with 401k, it is not always just the tax on the amount in the plan.

Not in same tax bracket always, non Roth may push higher tax bracket because of RMD and any being taken out is taxable.

Costs external to taxes can eat up a lot with a 401k because Medicare part B, taxable amount of SS and other items are based on income.

Due to limits on how much can put in, a Roth contribution is with after tax amount that is paid external, regular is essentially paid out of the account. If max can put in is $5K and tax is 20%, and amount doubles. the Roth benefit is 10k w/ no tax - net growth is 5k, regular is 8k w/ 2k going to tax - net growth is 3k.
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Old 06-06-2019, 03:39 AM
 
71,471 posts, read 71,652,652 times
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if you read through the thread i already stated multiple times that there are so many more advantages to a roth .. BUT THEY ARE NOT DIRECTLY RELATED TO GROWTH IN GAINS BEING DIFFERENT .. after tax nets may be different
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Old 06-06-2019, 03:40 AM
 
Location: Las Vegas & San Diego
188 posts, read 31,194 times
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Quote:
Originally Posted by mathjak107 View Post
we are in the same bracket in retirement as working . nothing changed ...
We are in the same or possibly in a higher bracket in retirement than when working due to RMD for 401K
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Old 06-06-2019, 03:42 AM
 
71,471 posts, read 71,652,652 times
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Quote:
Originally Posted by ddeemo View Post
Doesn't matter - a lot of other things can be much higher with 401k, it is not always just the tax on the amount in the plan.

Not in same tax bracket always, non Roth may push higher tax bracket because of RMD and any being taken out is taxable.

Costs external to taxes can eat up a lot with a 401k because Medicare part B, taxable amount of SS and other items are based on income.

Due to limits on how much can put in, a Roth contribution is with after tax amount that is paid external, regular is essentially paid out of the account. If max can put in is $5K and tax is 20%, and amount doubles. the Roth benefit is 10k w/ no tax - net growth is 5k, regular is 8k w/ 2k going to tax - net growth is 3k.
you need to even up the dollars ... you can't compare just contributions ... you would need to take the same pretax dollars and compare ..

if i wanted 5k in a roth in the 22% bracket i need 6400 in pretax dollars ... if all i could put in was 5k in a traditional then the comparison would be 5k in the traditional and 1400 in a tax advantaged fund in my taxable account .

so the differences are not going to be that great even investment wise .... conversion wise there is no limit to converting so equal pretax dollars are easy to match up.

given equal dollars pretax and equal gains , the results will always be the same between the traditional and the roth on the surface unless we start altering tax rates which no one knows yet . .

Last edited by mathjak107; 06-06-2019 at 04:00 AM..
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Old 06-06-2019, 03:45 AM
 
71,471 posts, read 71,652,652 times
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Quote:
Originally Posted by ddeemo View Post
We are in the same or possibly in a higher bracket in retirement than when working due to RMD for 401K
the rmd's are a whole other factor ... remember you can draw out 24k a year from a traditional if you are delaying ss and have no other taxable income and pay zero tax for 8 years using the standard deduction if a couple ... or you can take 48k and pay under 5% tax ...so depending on situation having deducted that traditional money at working tax levels and never paying taxes beats a roth .... so individual situation is very important. 48k year at just a 4-5% tax over 8 years can spend down 384k in ira money and have no rmd's on it while growing ss .

had i planned better i could have set a side cash , over funded my life insurance policy for decades and borrowed it out tax free , used the zero percent capital gains brackets in my taxable account , had a 100k plus income while delaying ss as well as getting rid of up to 48k a year from my traditional , all at 4-5% tax , plus got an aca subsidy ...

in fact if i leave my wife my traditional ira and lets say it is worth a million dollars ...she has no idea what she gets to to see after tax , especially filing single with rmd's ..

but if i take a bit of that ira money out , i can pay that 4-5% tax , buy a leveraged life insurance policy worth 1 million and pay a lot less then that 1 million dollar value .. she now gets 100% tax free money and i converted taxable ira money in to a lot more never taxed money by using a leveraged life policy .



so retirement planning can get very complex ... there are many ways to use the vehicles out there and in the end which is best will have lots of factors to it .

it is not as simple as one has rmd's and one does not . as you see you can write off those big working year deductions on the traditional and pull as much as 384k out with a smidgen of tax .

the problem is as you see most folks do not have enough knowledge of all the angles and options so they look at only the surface but never under the hood at all the options .

Last edited by mathjak107; 06-06-2019 at 04:06 AM..
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Old 06-06-2019, 05:02 AM
 
3,961 posts, read 1,690,813 times
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Did I miss how the OP is eligible to contribute if he is in the highest tax bracket? Does his work have a Roth 401K?
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Old 06-06-2019, 05:54 AM
 
Location: Omaha, Nebraska
7,296 posts, read 4,148,032 times
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Quote:
Originally Posted by RamenAddict View Post
Did I miss how the OP is eligible to contribute if he is in the highest tax bracket?
Backdoor Roth.
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Old 06-06-2019, 10:58 AM
 
Location: Las Vegas & San Diego
188 posts, read 31,194 times
Reputation: 177
Quote:
Originally Posted by mathjak107 View Post
... remember you can draw out 24k a year from a traditional if you are delaying ss and have no other taxable income and pay zero tax for 8 years using the standard deduction if a couple ... or you can take 48k and pay under 5% tax ...so depending on situation having deducted that traditional money at working tax levels and never paying taxes beats a roth .... so individual situation is very important. 48k year at just a 4-5% tax over 8 years can spend down 384k in ira money and have no rmd's on it while growing ss .
I get your point in your situation, doesn't apply in my case. I am in the 22% bracket before I draw a dime out of a 401K or draw SS and will be in 24% bracket with SS without any RMD even if I don't wait to take it. Also don't forget state taxes, in CA it adds another 2-4% in your scenario of 48k and is 9.3% or higher marginal for many.

Last edited by ddeemo; 06-06-2019 at 11:29 AM..
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Old 06-06-2019, 11:28 AM
 
Location: Las Vegas & San Diego
188 posts, read 31,194 times
Reputation: 177
Quote:
Originally Posted by mathjak107 View Post
you need to even up the dollars ... you can't compare just contributions ... you would need to take the same pretax dollars and compare ..

if i wanted 5k in a roth in the 22% bracket i need 6400 in pretax dollars ... if all i could put in was 5k in a traditional then the comparison would be 5k in the traditional and 1400 in a tax advantaged fund in my taxable account
Overall may be theoretically the same but practically is not because taxes are not constant and depending on individual situation, the amount paid in taxes may be more or less important when paid earlier. And because you are still limited by max contribution, the amount in the tax deferred will be worth more in a Roth than if in the 401k. Also don't forget state taxes, in CA it adds another 9.3% or higher marginal for many.

What is worth more 1M in a Roth or 1M in 401k. If in 30% tax bracket (22 fed 8 state), the Roth is worth 300k more for using as income because tax already paid. Also flexibility is way higher, with Roth, because could take out as much as want without worrying about tax. You could take 500k of it out to pay cash for a house, with the 401K you would have to take about 800k out because would need to pay almost 300k in taxes. In the first would still have 500k, the second would have 200k left.
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Old 06-06-2019, 11:42 AM
 
Location: Denver, CO
1,700 posts, read 4,061,251 times
Reputation: 1260
Quote:
Originally Posted by ddeemo View Post
What is worth more 1M in a Roth or 1M in 401k. If in 30% tax bracket (22 fed 8 state), the Roth is worth 300k more for using as income because tax already paid. Also flexibility is way higher, with Roth, because could take out as much as want without worrying about tax. You could take 500k of it out to pay cash for a house, with the 401K you would have to take about 800k out because would need to pay almost 300k in taxes. In the first would still have 500k, the second would have 200k left.

Again, you are discounting the fact that those are unequal amounts to compare. A better comparison is to actually calculate starting at year 0 putting in $10k to Roth and $12k to 401k, due to that tax being paid in year 0. When you ignore tax on the Roth contribution money, then you might as well ignore the tax on the 401k RMD.
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