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Hi all, I'm seeking opinions from the seasoned investors here. I'm 64 and still working, which I plan to do for another 4 or 5 years. My company just added an after-tax Roth option to our traditional pre-tax 401(k) plan. We can invest up to 15% in either, or split our contributions between them.
I am in a 24% tax bracket. I don't expect my tax bracket to be significantly, if at all, lower in retirement. I would like as much non-taxable income in retirement as possible to avoid the highest IRMAA.
In my situation, how would you divvy up your contributions? Is there an advantage to investing pre-tax dollars other than reducing present income taxes?
Hi all, I'm seeking opinions from the seasoned investors here. I'm 64 and still working, which I plan to do for another 4 or 5 years. My company just added an after-tax Roth option to our traditional pre-tax 401(k) plan. We can invest up to 15% in either, or split our contributions between them.
I am in a 24% tax bracket. I don't expect my tax bracket to be significantly, if at all, lower in retirement. I would like as much non-taxable income in retirement as possible to avoid the highest IRMAA.
In my situation, how would you divvy up your contributions? Is there an advantage to investing pre-tax dollars other than reducing present income taxes?
So you are 64 now & will reach FRA at 67. Good point to research how much you get in SS. By then you will also enroll in Medicare. Find out how your co treats retiree health benefits.
The nice part about 401K or a Roth is your gains accrue tax free. The tax bomb can hit when you pull the money out. From the 401K distributions taxed from your FIT. Further complicating this is having RMD Required Minimum Distribution kick in when you turn 73. AARP has a great calculator so you can see what the amounts could be in your case.
From a Roth you don't have these tax problems. Some use their Roth to preserve some money for their heirs. Different rules apply for a spouse or others.
A lot of planners would have you do all 3 types of accounts. 1)Taxable, 2) Tax Deferred 401K/IRA, 3) Tax Free Roth.
I am in a 24% tax bracket. I don't expect my tax bracket to be significantly, if at all, lower in retirement. I would like as much non-taxable income in retirement as possible to avoid the highest IRMAA.
In my situation, how would you divvy up your contributions? Is there an advantage to investing pre-tax dollars other than reducing present income taxes?
It seems like you answered your own question, yes?
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,061 posts, read 7,500,158 times
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OP, You have reached the QUACK (QUalified ACcount ACK) decision point, where they are no clear vision for long, future retirement income.
We chose ROTH 401k, for the outside chance that money will be pass forward to the next generation or two, with the option of personal use. We eventually used some of the funds for a downside home purchase in a HCOL area.
For our son, we advised to limit his contributions to 401k, IRAs. in favor of taxable. He has relatively adequate IRA, Roth, 401k, taxable. The IRA and personal Roth accumulated since his high school years. Current age 38, so he has participated in a few bull runs and some bears.
YMMV
Last edited by leastprime; 05-24-2023 at 10:45 AM..
Hi all, I'm seeking opinions from the seasoned investors here. I'm 64 and still working, which I plan to do for another 4 or 5 years. My company just added an after-tax Roth option to our traditional pre-tax 401(k) plan. We can invest up to 15% in either, or split our contributions between them.
I am in a 24% tax bracket. I don't expect my tax bracket to be significantly, if at all, lower in retirement. I would like as much non-taxable income in retirement as possible to avoid the highest IRMAA.
In my situation, how would you divvy up your contributions? Is there an advantage to investing pre-tax dollars other than reducing present income taxes?
Hi all, I'm seeking opinions from the seasoned investors here. I'm 64 and still working, which I plan to do for another 4 or 5 years. My company just added an after-tax Roth option to our traditional pre-tax 401(k) plan. We can invest up to 15% in either, or split our contributions between them.
I am in a 24% tax bracket. I don't expect my tax bracket to be significantly, if at all, lower in retirement. I would like as much non-taxable income in retirement as possible to avoid the highest IRMAA.
In my situation, how would you divvy up your contributions? Is there an advantage to investing pre-tax dollars other than reducing present income taxes?
If you were born before 1960, then your RMDs will begin at age 73. IRMAA will begin with Medicare.
With RMDs, our retirement tax bracket is higher than when we worked. Given your situation, I would be move all contributions to the Roth.
If you were born before 1960, then your RMDs will begin at age 73. IRMAA will begin with Medicare.
With RMDs, our retirement tax bracket is higher than when we worked. Given your situation, I would be move all contributions to the Roth.
In 5 years when my RMDs will start, I will be in the same tax bracket situation as you. 20+ years ago I never would have guessed that I would have more income in retirement than during my highest income working years. In 20-20 hindsight, I wish I would have put more of my retirement savings in a Roth during working years, but I was focused on the immediate desire to avoid higher same-year income taxes than what seemed like far-in-the-future income taxes. The once distant future is now the present!
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