Author Topic: Prioritizing Investment Vehicles  (Read 474 times)

Shenzhenigans

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Prioritizing Investment Vehicles
« on: December 29, 2018, 08:03:12 AM »
Hi all, SO and I have a lot of retirement account/investing options and I would like some advice on which to prioritize. I would appreciate if people could put their proposed withdrawal strategy with any solution they propose.

Available to us are:
ME-
-403b (mega backdoor Roth compatible as of 1/1/19)(match of 4.5% if 6% contributed)
-Roth IRA
-Trad IRA

SO-
-403b
-457b (government)
-Pension (6% required, unhealthy, we intend to withdraw contributions at separation, guaranteed 4% return on contributions)
-Roth IRA
-Trad IRA

US
-Joint brokerage
-Real estate investments



We currently make a little less than 100k combined gross, and I don't expect that to ever rise above 150k with our fields.

We can comfortably put about half of our income into savings/investments. Estimated FIRE age is 40, about 13 years from now.

We purchased a rental property last year as well and have a renter starting in a few weeks. Assuming this goes well, we would be interested in doing more of this in the future. Conservative cap rates in our area are at 8-9%.

Expense ratios in our plans are all incredibly low with the the exception of my 403b, which fall between .16 and .55 (domestic and international, respectively, no reasonable bond option.)

ysette9

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Shenzhenigans

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Re: Prioritizing Investment Vehicles
« Reply #2 on: December 29, 2018, 09:11:57 AM »
https://forum.mrmoneymustache.com/investor-alley/investment-order/

Why is pretax 401k preferred over a mega backdoor?

Does the above preference take into account current historic low taxes and the potential for rising after 2025?

Why is a Roth prioritized over 401k but not mega Roth? This doesn't mention the 401k deduction being used if it pushes us into a lower tax bracket. In our case we are solidly in 12% with or without the deduction.



ysette9

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Re: Prioritizing Investment Vehicles
« Reply #3 on: December 29, 2018, 10:23:28 PM »
Mega backdoor is something that is necessarily done after you fill up your tax-advantaged space (traditional 401k or Roth).

The investment order presumes future  tax rates will be the same as they are today for the simple reason that we don’t have any other reliable information. You can take your educated guesses on what will happen with tax rates, and I probably agree with you that they will go up, but we just don’t know. My track record of predicting stock movements is so bad as to almost be predictive in the opposite direction, so I’m not going to bet my financial future on my guesses. That said, having a mix of taxable, pre-tax, and Roth accounts is probably a good move for flexibility.

MDM

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Re: Prioritizing Investment Vehicles
« Reply #4 on: December 30, 2018, 03:41:50 AM »
Does the above preference take into account current historic low taxes and the potential for rising after 2025?
What do you expect for your marginal tax rate in retirement, and how did you estimate that?