New question on Roth and Traditional.
I don’t want to roll my smaller Traditional IRA over to my larger Roth IRA right now as my tax bracket recently increased.
In retirement when I’m pulling mostly from Roth vehicles, am I still able to roll the Traditional over at a very low tax bracket? Right now there’s only ~$45k in Traditional so can I roll that all over in the same year and pay taxes as though I made $45k, meanwhile pulling out Roth funds to use?
I mean… yes… but why? It would be simpler and land you in precisely the same place to simply pull the $45,000 from the traditional plan and leave the Roth alone.
I mean, I guess if you only need $20,000 then you may as well just roll $25,000 and withdraw $20,000… that’s still two transactions but only with one account so still probably simpler.
Oh that does assume you’ll be at least 59.5 when you retire. If you’re going to retire earlier than that then there is a benefit to pulling principal from the Roth account in that you avoid the 10% penalty.
My estimate of retirement is around 56, anywhere from 52 to 62 is on the table with margins for life changes.
Ok, yes, from age 56 - 59.49999 then what you suggest makes sense if you add the caveat that you are withdrawing principal from the Roth account(s).
Cool. Thought so… but I haven’t done a lot of research on the “using” part of retirement funds.
worker in 50’s does not have a roth 401k, just a traditional.
future tax bracket will be lower than current.
Is there any reason to start contributing to the roth 401k for this person at the expense of traditional 401k? feels like no
Seems barring any edge cases, they should go 100% traditional.
What are the future & current tax brackets?
As a general rule I like to have some money in Roth to use for major purchases in retirement. I don’t want my taxes going crazy the year I buy myself a new car in retirement, as an example.
If we’re talking about 12% vs 10% then yes, put some in Roth. If we’re talking about 37% vs 10% then maybe don’t worry about it.
unless they are looking to avoid RMD, does not seem a good ROTH candidate.
Or if they are hoping to retire early and enjoy ACA subsidies having Roth $ would be useful to lower taxable income.
For a family of 2:
Taxable income $26,130: free healthcare
Taxable income $34,840: Cost is $697 (8% of amount above $26,130)
Taxable income $43,550: Cost is $1,742 (10%)
Taxable income $52,260: Cost is $3,136 (12%)
Taxable income $69,680: Cost is $5,923 (13.6%)
something along those lines, not guaranteeing exactly correct.
So far, the reasons are
Don’t forget that Roth doesn’t fall under RMD.
Also
taxation of Social Security
Medicare premiums
the HSA will do that!
Yes, but if your income is above a certain threshold you’ll be taking larger HSA deductions to cover the Medicare premiums because the premium goes up with income.
on the basis of this discussion, will plan for a roth 401k starting in 2024. have updated the personal spreadsheet to reflect assets that are in categories:
That along with some other assumptions that needed updating have been very helpful to making the spreadsheet better.
So I read on the internet (so it must be true) that soon, High Comp Employees over 50 years old are not allowed to take their Ketchup Pre-tax 401k Contribution (which currently stands at $7,500 per year).
Ketchup Contributions will still be allowed, but you MUST push them into a Roth 401k and thus you must pay tax on it.
I came across this recently as well, also on the internet, so it must be even more true.
i had seen it previously, but think i recently saw it was delayed to 2026 or so to allow plans to be ready to accept it. (not every employer offers BOTH regular and roth 401k and so this gives them more time to create the necessary options.)