There are so many individual factors to consider in terms of goals, assets, and spending plans that I don't think a blanket statement applies. But, I agree with the general thesis to push a lot over there, especially if you think your overall withdrawal in retirement might be substantial and land you in a high tax bracket.Every penny you can stuff in there. The theory is to model your lifetime projected income (roughly, SS, dividends, RMD, what all) and see where that would place you if a typical year was taxed like 2024. If it's the 22% bracket for the foreseeable, guessable future, then convert to the top of the 22% bracket this year, and reassess annually. If there's a future guesstimate year that's higher, then convert more. Note that you will never be worse off converting at 22% now if that's your "level pay" bracket. State taxes may also impact that, and so moving to a low tax state may mean wait.How much of our portfolio do you think we should hold in Roth's?
There are a lot of discussions about putting high growth assets in your Roth (tax free forever) or holding them in a regular brokerage account (capital gains are cheaper), but for sure leave all your bonds and dividend producers in the pretax account (lower growth, regular income either way).
I'm at about 50/50 Roth/pretax, and trying to push the Roth every year higher for inheritance purposes.
I think it's safe to assume the tax brackets thresholds will increase with inflation, so that is something to keep in the back of your mind.
A point everyone understands, but doesn't always appreciate is that short of some monumental tax law changes, that Roth money and the gains are exclusively yours and is completely protected (speaking of US residents). Therefore, you take away the risk of income tax monkey business that you will have from other non-protected sources. Risk mitigation has value.
Having said all that, less than 5% of my money is in Roth like accounts because I've never had windows of opportunity as we've been in high tax brackets. I'm hoping to have some windows coming up with early retirement arriving in a few years, but it won't be massive. I guess that's a perversely good problem to have.
Side note about long term investing, but I was going back and looking at one of my wife's Roth's that I set up about 20 years ago and dumped into the Vanguard growth fund. She was only allowed to put $3K in there, but it's over $25K (8X+) now and if that trajectory continues and we live normal lifespans, it will end up at over $200K. All from a single $3K investment. Pretty cool.
Statistics: Posted by Baylor Boy — Wed Aug 07, 2024 5:06 pm — Replies 18 — Views 715