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.
The financial considerations have been discussed above. With regard to the non-financial considerations, be assured that there is just as much funkiness going on wherever people move to as there was where people moved from, on average.
^^ I know your entire question was based on a fairly specific "what if." But to my mind, anyone who has any substantial money in tax-deferred accounts...would/should likely also have money in NON tax deferred or emergency fund accounts. No? What are the chances that "the only source to fund it was this traditional IRA."
Quote:
I just did a little, "What if". I said, "What if I had an additional large expense in 2014. Something like $20,000 for medical expenses or something". And the only source to fund it was this traditional IRA. And I wanted to "Render onto Caesar the things that..." By that I mean withdraw enough from the IRA to cover the tax due on the withdrawal. Like paying the estimated tax when I make the withdrawal. This is what I found. To net $20,000 after taxes I would have to withdraw $71,000 from the IRA based on my 2014 tax return.
That is where I am lacking. I have way too little non tax deferred savings besides a large Roth. I really can't save more than (and often, not even up to) the maximum of deferred to my 401k, plus my Roth, plus my wifes deductible IRA ($37k/yr) so I can't seem to get past a few months living expenses saved. After reading all this, I wonder if I should forego, as the OP said, some tax deferred savings, and just make it after tax, which I can roll once a year in to my Roth, while I still have the salary to do so, over the next 5 years...
That is where I am lacking. I have way too little non tax deferred savings besides a large Roth. I really can't save more than (and often, not even up to) the maximum of deferred to my 401k, plus my Roth, plus my wifes deductible IRA ($37k/yr) so I can't seem to get past a few months living expenses saved. After reading all this, I wonder if I should forego, as the OP said, some tax deferred savings, and just make it after tax, which I can roll once a year in to my Roth, while I still have the salary to do so, over the next 5 years...
Once you retire you no longer have retirement, emergency, funds etc. You have money. The distinctions are the rate of taxation. Even non retirement accounts have tax consequences took,me a few years to get in the new time frame. As you start your after tax savings be mindful of creating long term capital gains and distinguishing dividend and interest income/gains. Remember in order to get 10k in usable money from your retirement account you might need to take out 13k.
That's basically why I specified saving after tax to my 401K, then rolling it over to a Roth each year. Maybe I don't understand something, but wouldn't the ideal retirement supplemental income (assuming the vast majority of it was sufficient to live on, already, as fixed income as in pension and SS) be entirely a Roth? That's sort of the side line point of this thread.
I mean, assuming you are (or will be) in a healthy 25% bracket because that's the job path and life you've already taken to your late 50's, then you are stuck (in a good way) at a higher than average income that you can always live down to or below, and be comfortable. I could retire tomorrow (well, actually in 8 months because of employer sponsored health through 65), with literally no problem what so ever. Based on all the "Retire early", "don't waste your time chained to desk" threads, I'm a fool for not planning on doing so.
But I like my job, and my own personal mindset is "I worked dam hard to get where I am, and these last 5 years will practically double my income for life. I personally WANT THAT!!" It's not greed, per se (or is it?), but the personally gratifying feeling of accomplishment, of "winning" the real FI lottery, at my level. To some FI is $200k/yr, some $100k, some $50k. To each their own. Mine is less than $200k and much more than $50k. And the fact that I wouldn't mind some of the benefits of being able to spend money on "extravagant" experiences (travel, etc) without worrying if I'm killing my future.
So, why does it make sense to take after tax money, and purchase Blue Chips to secure dividend income and LTCGs to get a 15% tax rate, instead of just purchasing the same (or higher/riskier) equities in a Roth and pay NO tax on it, ever?
You pay the same upfront tax on the basis. My income tax rate will not go down in retirement, once I hit 70. If I keep saving in just pre-tax, then I am forced by RMDs to take it when I may not want to. If my spouse dies, and I find myself single (and she's 5 years older than I, and has some issues), then my tax rate goes up significantly.
That's basically why I specified saving after tax to my 401K, then rolling it over to a Roth each year. Maybe I don't understand something, but wouldn't the ideal retirement supplemental income (assuming the vast majority of it was sufficient to live on, already, as fixed income as in pension and SS) be entirely a Roth? That's sort of the side line point of this thread.
I mean, assuming you are (or will be) in a healthy 25% bracket because that's the job path and life you've already taken to your late 50's, then you are stuck (in a good way) at a higher than average income that you can always live down to or below, and be comfortable. I could retire tomorrow (well, actually in 8 months because of employer sponsored health through 65), with literally no problem what so ever. Based on all the "Retire early", "don't waste your time chained to desk" threads, I'm a fool for not planning on doing so.
But I like my job, and my own personal mindset is "I worked dam hard to get where I am, and these last 5 years will practically double my income for life. I personally WANT THAT!!" It's not greed, per se (or is it?), but the personally gratifying feeling of accomplishment, of "winning" the real FI lottery, at my level. To some FI is $200k/yr, some $100k, some $50k. To each their own. Mine is less than $200k and much more than $50k. And the fact that I wouldn't mind some of the benefits of being able to spend money on "extravagant" experiences (travel, etc) without worrying if I'm killing my future.
So, why does it make sense to take after tax money, and purchase Blue Chips to secure dividend income and LTCGs to get a 15% tax rate, instead of just purchasing the same (or higher/riskier) equities in a Roth and pay NO tax on it, ever?
You pay the same upfront tax on the basis. My income tax rate will not go down in retirement, once I hit 70. If I keep saving in just pre-tax, then I am forced by RMDs to take it when I may not want to. If my spouse dies, and I find myself single (and she's 5 years older than I, and has some issues), then my tax rate goes up significantly.
Am I not understanding something?
Sure what ever meets your goals and need. My comments were general in nature.
So, why does it make sense to take after tax money, and purchase Blue Chips to secure dividend income and LTCGs to get a 15% tax rate, instead of just purchasing the same (or higher/riskier) equities in a Roth and pay NO tax on it, ever?
Am I not understanding something?
Only because your yearly Roth contributions are limited. I put all I could in the Roth and the rest in an etrade account.
Yes, the contribution amount is limited to $6500, but I can contribute as much as I want after tax in to my 401k while I am still working, up to my 401k limit, and roll that amount over in to my Roth once a year.
Only because your yearly Roth contributions are limited. I put all I could in the Roth and the rest in an etrade account.
If you are able to make them at all. There are income limits.
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.