Thanks, that’s helpful. I’m 100% Equity Index funds right now, so not too much to worry about right now. Taxable vs non-taxable / tax deferred for bonds is clear, however my mind did skip to a question of should bonds be placed in trad-IRA / 401K over ROTH, the answer would usually be yes I assume… unless we are in a period of low / no stock growth ?Haha, I was just sitting down to write this same post. +1I've spent a bit of time digesting the various pages, and I think my conclusion is as follows:What US state do you live in & what state income tax rate do you pay?
If you live in a high income tax state (NY/NJ/CA/etc.), you are paying an additional 7%-10% to the state & Roth contributions are probably a money-loser for you. It's generally better for someone in your shoes to defer Federal & state income taxes as a wage slave & instead perform Roth conversions in early retirement, when W-2 wage income goes away.
Of course, a large pension could throw a monkey wrench into the works (that's a spanner to you, lol), but if you could delay claiming the pension until 65, you could retire in your mid/late 50s & do Roth conversions very happily for 7-10 years at a lower tax rate. If you retire & move to FL or another state with zero income taxes, Roth conversions in early retirement can really pay off, since you would only be paying the Fed taxes on the conversions.
PS- Don't forget to make a backdoor Roth contribution for 2023 for your wife. You have until Tax Day 2024 (15 APR) to make a 2023 IRA contribution.
Contribute to trad-401K to max, then everything else into ROTH and then if I can max the mega backdoor ROTH, taxable brokerage.
My thinking is that if I don't make Partner, that at 5% real growth that is $1.3M. I can convert that easily in 12 years post retirement before RMDs. If it returns 8%, well that's more challenging, but hey that's a nice problem to have.
If I make Partner in 5 years (or whenever) then I can stop after that period, and have only $400K in trad-IRA, that can either be sunk by retiring a coupe of years early and living off taxable brokerage, or just accepting I won the Partner lottery and drawing / converting it anyway.
I’ll also likely have to revisit in several years time to see what’s in the trad-401k and whether it’s feasible to convert it all or not.
Love the US tax system !
Max Trad 401k, max Backdoor Roth IRA for you & your wife, plus use the Mega BDR in the 401k. This saves taxes during the accumulation phase & gives tax diversification by contributing to both types of accounts- Trad & Roth. Option to Roth convert some (or all) of the Trad 401k in early retirement.
Additionally, you will also likely end up with a sizable taxable account as well- if you have not already, please read the wiki on tax efficient fund placement to help optimize your Trad/Roth/taxable asset location once you have decided on an asset allocation: https://www.bogleheads.org/wiki/Tax-eff ... _placement
Statistics: Posted by Noremedy21 — Sun Mar 24, 2024 11:27 pm — Replies 13 — Views 942