Author Topic: 401(k) vs Roth IRA vs Taxable Accounts  (Read 10575 times)

smallpox

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401(k) vs Roth IRA vs Taxable Accounts
« on: January 27, 2014, 07:31:20 AM »
Hi, first post here. I've been lurking here for quite some time and learning a ton. Here's a quick overview of my current financial state before I get into my main question(s):

I'm 34, currently saving around 50% of my income and plan to do so until we reach FI. I just started saving in earnest this past year so I don't have much built up yet. I'm hoping to reach FI in around 10-12 years.

My current savings strategy (for our family of 5) includes the following:

  • Contribute 6% to my company 401(k) to get the 6% match
  • Max out Roth IRA every year ($5500 per year)
  • Remainder into taxable accounts (index funds like VTSAX, etc…) (approx. $28K per year)

So…I know most folks here recommend maxing out your 401(k) before contributing to taxable so here's where my questions come in. We're currently in the 15% tax bracket and I expect to stay there throughout my working life. My income will soon be high enough to start to make that difficult, but i'm planning to ramp up my 401(k) allocation as necessary to keep us in the 15% bracket.

I also expect to be firmly in the 15% bracket during retirement. I know most people plan to be in a lower tax bracket during retirement but we're looking at retiring with plenty of money and have plans to do some traveling. I can fairly confidently say it's very likely we'll remain in the 15% bracket for most if not all of retirement. On the other hand, I don't foresee us going over the 15% bracket either. The cap on that is $72K/year and once you throw deductions in there we're looking at being able to spend in the mid 90K's before going over. That's more than twice what we're spending now and we have a mortgage and 3 kids still at home.

At this point i'm having trouble seeing the major advantages of either the 401(k) (aside from the match) or the Roth. They both provide additional inflexibility with not much benefit (that I can see) for my particular situation at least. I'd like you all to tell me if i'm wrong here :)

With the 401(k) I can avoid taxes now, but i'm still paying tax at the same 15% rate on withdrawal. As far as I know the math works out the same in this situation.

With the Roth, I pay taxes now, and get tax-free growth, but as I understand it that's exactly the same situation as with my taxable accounts. If we remain in the 15% bracket and I continue with my buy-and-hold strategy I won't be taxed on long-term capital gains either.

The way I see it, as long as i'm not missing out on significant tax advantages with my current strategy, i'd much prefer to have my money in a taxable account for maximum flexibility. I guess my initial questions are...

  • Am I crazy for not maxing out my 401(k) each year?
  • Any reasons why I shouldn't just stick with my current plan of having a majority of my investments going into taxable accounts?
  • Anything i'm missing here?
« Last Edit: January 29, 2014, 06:56:05 AM by smallpox »

smallpox

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #1 on: January 27, 2014, 09:12:53 AM »
Are there income limitations for shifting 401(k) funds to a Roth IRA while still paying zero tax? I was under the impression that there were limits, and that they were lower than what we might be expecting to spend during retirement.

Assume we're wanting to spend ~50K per year after we reach FI. Will we qualify to shift funds like this and still avoid paying taxes entirely?

MissPeach

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #2 on: January 27, 2014, 01:01:02 PM »
The pp already mentioned about getting the extra 15% in funds to invest. Another thing I have learned hanging around here and on some of the blogs linked is you can roll money into an IRA and eventually a ROTH too (via the backdoor) if you do decide to pay tax on that money.

The flip side of this is that you do need to also build up a good amount of non-tax deferred income if you decide to retire early and avoid the penalties of the IRAs. The blogs already linked on this thread have some good advice on this as well as a good demonstration on how you can get FI sooner with good tax planning.

dragoncar

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #3 on: January 27, 2014, 01:17:25 PM »
Are there income limitations for shifting 401(k) funds to a Roth IRA while still paying zero tax? I was under the impression that there were limits, and that they were lower than what we might be expecting to spend during retirement.

Assume we're wanting to spend ~50K per year after we reach FI. Will we qualify to shift funds like this and still avoid paying taxes entirely?

Play with a tax calculator to find out.  I think it's around 10k tax free for singles and 20k for marrieds

Frankies Girl

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #4 on: January 27, 2014, 01:36:35 PM »
Are there income limitations for shifting 401(k) funds to a Roth IRA while still paying zero tax? I was under the impression that there were limits, and that they were lower than what we might be expecting to spend during retirement.

Assume we're wanting to spend ~50K per year after we reach FI. Will we qualify to shift funds like this and still avoid paying taxes entirely?

That's a high average yearly spend, but it might work out, just depends on how much is coming from the conversion, but the key is to stay under the 15% tax rate. If you read this post:

http://www.madfientist.com/traditional-ira-vs-roth-ira/

The Mad FIentist has a link to the TurboTax estimator, (https://turbotax.intuit.com/tax-tools/calculators/taxcaster/) and his example was 9K in income (the money being rolled from IRA to Roth) and then 15K for long-term cap gains and 15K for dividends and coming up with zero taxes owed. So you'd need to make sure you have enough cap gains/dividends to meet the amounts needed and yet still stay under the taxable threshold. I just played with it a bit, but for example, if married filing jointly, you could convert up to 20K and have 20K each on the dividends and long-term cap gains, and still pay zero. But it all depends on what you've got in your accounts, and what sort of capital gains/dividends you'll be making as well if you're looking for higher amounts to live off of.

smallpox

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #5 on: January 27, 2014, 04:01:32 PM »
Perfect. That calculator is actually super helpful. Looks like up to $20K (on the conversion) for married filing jointly, and then long-term capital gains up to $72K before any tax kicks in. That's exactly what I was looking for.

foobar

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #6 on: January 28, 2014, 11:22:52 AM »
It should be pointed out that you can do almost another 20k and be in the 10% bracket if you ended up needing to convert or extract more than 20k/yr from your 401(k)/ira. At the 15% bracket you can make arguments for the ROTH making sense. When your in the 25% bracket, you need to defer those taxes as much as possible and count those lower average rates during retirement.


Perfect. That calculator is actually super helpful. Looks like up to $20K (on the conversion) for married filing jointly, and then long-term capital gains up to $72K before any tax kicks in. That's exactly what I was looking for.

Bruno

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #7 on: January 31, 2014, 12:36:25 PM »
We're currently in the 15% tax bracket and I expect to stay there throughout my working life.

[...]

I also expect to be firmly in the 15% bracket during retirement.
In this case it does not make a difference if you contribute to Roth IRA or 401(k). Either way you pay the same amount in taxes.
Best solution is to contribute to Roth IRA in the years with lowest tax rate during your life, it does not matter if early or late in life.

If you can manage wild swings in after tax income and you have the option of deferred compensation (457(b)): you could contribute the max to both 401k and 457(b)  every other year, and -if that leads to a lower tax rate- also put money into a Roth in those years.


avstraq

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #8 on: January 31, 2014, 03:19:41 PM »
If I'm understanding part of the question correctly, the disadvantage of taxable investments is you get taxed every step of the way: invest after tax money, you pay taxes on earnings. With a Roth IRA, money grows tax-free, but you'll have to wait until you're of retirement age to withdraw the earnings tax-free (or have a qualified distribution before that).

foobar

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #9 on: January 31, 2014, 08:06:33 PM »
This is only true if your taking the exact same amount of money out while your in the 15% bracket.  And for most people, I think that is unrealistic. For example think about the upper 15% people. They are making ~90k (20k deduction 70k of income). When they retire are they going to get all 90k as OI? I doubt it. Something along the lines of 50k of OI, 20k of capital gains, and 20k of return of principle is somewhat reasonable.  That person is going to pay (rough approximations) 0% tax on 20k,10% tax on ~20k of OI, 15% on 10 and then 0% on the capital gains and return of capital for something around a 5% tax rate (doing the math in my head). Obviously as you up the OI contribution, it will get closer to the taxes that you would have paid in the first case.

Now the ROTH does have the advantages of no RMDs and sucking out the contributions before retirement if needed. You can run the math but if you spend down the IRA early (maybe doing some conversions to roth in years when you don't have much income) I doubt that you are likely to run into this problem.

In this case it seems like a no brainer to max the 401(k) out since you will still have 10k+ going into taxable accounts which should give you a very nice fund in 10 years to carry you the approximately 15 years until you can get to the 401(k) money.


We're currently in the 15% tax bracket and I expect to stay there throughout my working life.

[...]

I also expect to be firmly in the 15% bracket during retirement.
In this case it does not make a difference if you contribute to Roth IRA or 401(k). Either way you pay the same amount in taxes.
Best solution is to contribute to Roth IRA in the years with lowest tax rate during your life, it does not matter if early or late in life.

If you can manage wild swings in after tax income and you have the option of deferred compensation (457(b)): you could contribute the max to both 401k and 457(b)  every other year, and -if that leads to a lower tax rate- also put money into a Roth in those years.





Cheddar Stacker

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #10 on: January 31, 2014, 09:04:01 PM »
It should be pointed out that you can do almost another 20k and be in the 10% bracket if you ended up needing to convert or extract more than 20k/yr from your 401(k)/ira. At the 15% bracket you can make arguments for the ROTH making sense. When your in the 25% bracket, you need to defer those taxes as much as possible and count those lower average rates during retirement.


Perfect. That calculator is actually super helpful. Looks like up to $20K (on the conversion) for married filing jointly, and then long-term capital gains up to $72K before any tax kicks in. That's exactly what I was looking for.

Also worth pointing out - state tax will likely not follow federal. If you live in a state without income tax great, but otherwise don't forget you will pay some tax. The scenario I ran had me taking about $45K in conversions (2 kids + itemizing) and it resulted in about 4.5% tax in my state. If you have kids, or you itemize your deductions, you can go even higher than $20K conversion and still not pay any/much federal income tax.

Workinghard

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #11 on: February 01, 2014, 04:18:22 AM »
My dh and I contribute to a 401k and Roth IRAs. I recently became eligible for the 401k where I work. From a short term perspective, contributing to it decreases my taxable income which makes it worthwhile to pick up extra hours. Before the 401k contribution, when I worked extra, I didn't really "see" it in my paycheck. I'm much more motivated now. 

phred

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #12 on: February 08, 2014, 12:49:43 PM »
if you're in the 15% tax bracket, and are determined to be there your entire life, you don't really need a Roth; a regular IRA will do just fine while lowering your current taxable income.  You only need a Roth if you're planning to use it to buy an apartment complex
  As for the 401k, read the prospectus carefully to see what fees are being charged for each fund.  Get an opinion of the fund from Morningstar

dragoncar

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #13 on: February 08, 2014, 01:07:42 PM »
iYou only need a Roth if you're planning to use it to buy an apartment complex

wut?

MooseOutFront

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #14 on: March 12, 2014, 01:20:26 PM »
I just wanted to piggy back this thread with a directly related question.

I have the option for a 401k and a Roth 401k at wife's work.  Maxing all tax advantaged space has us about $10k below the 25% bracket ($73,800 for 2014).  I am kicking around the thought of switching over to the Roth 401k to fill up the 15% bracket.

The previous posts are making me lean against it.  That plus the short-term sting of a higher monthly tax bill.  The part I like about it is that as soon as we semi-retire and roll the Roth 401k portion to our Roth IRA then the contributions become available to live off of.  Living off Roth contributions for 5 years while tIRA roll-overs season in the Roth is part of our plan if needed.

OTOH I expect us both to work for ourselves in semi-retirement and suspect we'll be able to pull in a combined $50k in wages right off the bat.  I picture "filling up" the 15% bracket with Roth conversions every year at that time, so the odds of all conversions for us being 15% seem pretty good.  Unless we make more than I plan on (likely even) and don't end up doing many conversions until we're really ready to not work at all.
« Last Edit: March 13, 2014, 08:01:39 AM by MooseOutFront »

Cheddar Stacker

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #15 on: March 12, 2014, 01:38:28 PM »
Some Roth isn't the worst idea, but it's not the most optimal when strictly considering taxes. If you have other motivations (like owning rental real estate which I've heard you mention before) then a little Roth won't hurt. I'm sticking with all traditional and anything extra is going toward real estate savings and/or a back door Roth, but only after maximizing all possible tax deferrals.

Bruno

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #16 on: March 12, 2014, 01:40:07 PM »
It doesn't make a difference in your case, you are at 15% now and will be at 15% in retirement with your projections. So no advantage either way.
The only case where a Roth 401k makes more sense is if you pan to max out the contribution limit, permitting you to effectively contribute more now.

foobar

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #17 on: March 12, 2014, 09:17:46 PM »
Taxes will be close to a wash. The roth has the advantages of avoiding RMDs and potentially reducing amount of taxable SS and medicare. The traditional approach means you will have a nice taxable account that you can use to avoid having to take money  out of the ROTH. I would tend to vote for the traditional because in the case where you only make 25k from those part time jobs, you should come out ahead.

I just wanted to piggy back this thread with a directly related question.

I have the option for a 401k and a Roth 401k at wife's work.  Maxing all tax advantaged space has us about $10k below the 25% bracket ($73,800 for 2014).  I am kicking around the thought of switching over to the Roth 401k to fill up the 15% bracket.

The previous posts are making me lean against it.  That plus the short-term sting of a higher monthly tax bill.  The part I like about it is that as soon as we semi-retire and roll the Roth 401k portion to a Roth IRA then the contributions become available to live off of.  Living off Roth contributions for 5 years while tIRA roll-overs season in the Roth is part of our plan if needed.

OTOH I expect us both to work for ourselves in semi-retirement and suspect we'll be able to pull in a combined $50k minimum in wages right off the bat.  I picture "filling up" the 15% bracket with Roth conversions every year at that time, so the odds of all conversions for us being 15% seem pretty good.  Unless we make more than I plan on (likely even) and don't end up doing any conversions until we're really ready to not work at all.

MooseOutFront

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #18 on: March 13, 2014, 08:10:54 AM »
Some Roth isn't the worst idea, but it's not the most optimal when strictly considering taxes. If you have other motivations (like owning rental real estate which I've heard you mention before) then a little Roth won't hurt. I'm sticking with all traditional and anything extra is going toward real estate savings and/or a back door Roth, but only after maximizing all possible tax deferrals.
2014 will make the 5th year we've maxed 2 Roths and I picture doing it for 5 more before we "retire."  So we'll have something there to work with, though admittedly I've never looked into using a Roth for income producing property purposes.


MooseOutFront

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #19 on: April 01, 2014, 02:23:49 PM »
Thanks to Justin's post about paying $150 in taxes on $150,000 income:
http://rootofgood.com/make-six-figure-income-pay-no-tax/#comment-10180

I just had the paradigm altering discovery that my wife has a 457b plan available to her and that I just neglected to ever have it cross my mind before now.  This plan has Roth or income deferring options in it. Had no idea a person could max this AND a 401k and that the 457b doesn't even have early withdrawal penalties.  What a mistake I made electing for the 401k 5 years ago instead of this.

So now I am no longer in "achievement unlocked: max tax advantaged space" world.  Just started investing in taxable last month too.  That's over now.  So now that I'm contributing to the 457b my AGI is down into the range where I can contribute to traditional instead of Roth for the first time.  I can't imagine not doing my roths, but at this point every decision I make boils down to whether I want to prepay my taxes at 15% or do I think I'll be able to use the current strategies in 6 years to convert it over to Roth at 0%-15%.
« Last Edit: April 01, 2014, 02:29:38 PM by MooseOutFront »

Bruno

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #20 on: April 01, 2014, 09:10:20 PM »
Had no idea a person could max this AND a 401k and that the 457b doesn't even have early withdrawal penalties.
Ah, glad you saw the light. 
457s have early withdrawal penalties, however, once you quit the job you can take the money out.

sherr

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #21 on: April 02, 2014, 12:07:32 PM »
Not quite.  By investing in the 401k, you have an additional 15% in investment funds that get to compound over the years.  To make it easy, say you have $10,000 to invest this year.  You can invest the full amount in your 401k, or you can take the tax hit and invest $8,500 in a regular taxable account.  Then, when you hit FI, you can shift some of those funds into a Roth IRA without being taxed.  How?  Take a look at this:

I realize this is an old thread, but I feel the need to point out that this is completely and totally wrong. If you assume that your income tax rate in retirement is going to be the same as your current tax rate (which the OP is), then there is no difference at all between a pre-tax or a post-tax retirement account. This is guaranteed through the associative property of multiplication; it doesn't matter what order you multiply in. Let's take you example, assuming 15% tax rate now, 15% tax rate in retirement, $10,000 to invest, and oh, let's say 20% average returns every year for 30 years.

Pre-tax (traditional IRA or 401k):
$10,000 (initial investment) * 1.20 ^ 30 (20% returns for 30 years) * 0.85 (less 15% tax rate in retirement) = $2,017,698.67

Post-tax (Roth):
$10,000 (initial investment) * 0.85 (less 15% tax before you invest) * 1.20 ^ 30 (20% returns for 30 years) = $2,017,698.67

The only reason the Mad Feintist comes up with different numbers is because he is assuming that your tax rate in retirement will be 0% because you will live on only $9,750 / year (see the section "Eventual Taxation?"), which after the standard deductible and other credits means you will have no taxible income. That is very different from what the OP explicitly said they plan on doing.

foobar

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #22 on: April 02, 2014, 12:31:29 PM »
You assumption is that he is going to pay 15% taxes in retirement. He would need to be well into the 25% bracket for that to  happen. A reasonable guess would be that he would be paying 5-10% range assuming an income of 40-80k.  So off that the tIRA comes out ahead. Factor back in higher medicare copays/loss of ACA subsidies and taxation of SS and your likely to being back to where they are pretty much a wash. Throw in a changing tax code and you have no way of picking the best option. I am comfortable saying that deferring taxes when your in the  35% and up bracket (and are planing to retire in a lower tax state)  is a no brainer. Down the in the 15% bracket it is a lot more difficult to figure out what is the best move.


Not quite.  By investing in the 401k, you have an additional 15% in investment funds that get to compound over the years.  To make it easy, say you have $10,000 to invest this year.  You can invest the full amount in your 401k, or you can take the tax hit and invest $8,500 in a regular taxable account.  Then, when you hit FI, you can shift some of those funds into a Roth IRA without being taxed.  How?  Take a look at this:

I realize this is an old thread, but I feel the need to point out that this is completely and totally wrong. If you assume that your income tax rate in retirement is going to be the same as your current tax rate (which the OP is), then there is no difference at all between a pre-tax or a post-tax retirement account. This is guaranteed through the associative property of multiplication; it doesn't matter what order you multiply in. Let's take you example, assuming 15% tax rate now, 15% tax rate in retirement, $10,000 to invest, and oh, let's say 20% average returns every year for 30 years.

Pre-tax (traditional IRA or 401k):
$10,000 (initial investment) * 1.20 ^ 30 (20% returns for 30 years) * 0.85 (less 15% tax rate in retirement) = $2,017,698.67

Post-tax (Roth):
$10,000 (initial investment) * 0.85 (less 15% tax before you invest) * 1.20 ^ 30 (20% returns for 30 years) = $2,017,698.67

The only reason the Mad Feintist comes up with different numbers is because he is assuming that your tax rate in retirement will be 0% because you will live on only $9,750 / year (see the section "Eventual Taxation?"), which after the standard deductible and other credits means you will have no taxible income. That is very different from what the OP explicitly said they plan on doing.

sherr

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #23 on: April 02, 2014, 12:40:39 PM »
You assumption is that he is going to pay 15% taxes in retirement. He would need to be well into the 25% bracket for that to  happen. A reasonable guess would be that he would be paying 5-10% range assuming an income of 40-80k.  So off that the tIRA comes out ahead. Factor back in higher medicare copays/loss of ACA subsidies and taxation of SS and your likely to being back to where they are pretty much a wash. Throw in a changing tax code and you have no way of picking the best option. I am comfortable saying that deferring taxes when your in the  35% and up bracket (and are planing to retire in a lower tax state)  is a no brainer. Down the in the 15% bracket it is a lot more difficult to figure out what is the best move.

I agree completely.

Yes assuming that a 15% marginal rate today is equivalent to a 15% average rate in retirement was an oversimplification on my part. My main point was just that the idea that "it's better to defer because your money has more time to grow" is absolutely wrong without taking other factors into account. As you say, predicting the future is hard.

sherr

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #24 on: April 02, 2014, 01:57:46 PM »
Yes, that is basic math that most people can understand.  The "bonus" comes in when you look at the tax structure we have.  Since the OP is married, the first $20,000+ of income is not taxed at all.  The next $18,000+ is taxed at 10%.

The OP can have the extra 15% now by saving on the taxes.  Then in retirement, he can have the Roth IRA conversion ladder that will have the first $20,000+ taxed at 0% and, if he wants, the next $18,000 taxed at 10%.  Still seems like a better deal than paying the 15% now.  So, where am I "completely and totally wrong"?

Because that's not what you said. You said that deferring was better simply because the extra 15% gets to compound over time. That's not true, given equivalent tax rates it makes no difference.

If you had said what you said here you would be correct, but still ignoring what the OP said they were planning on doing. They said they were going to be in the 15% tax bracket when in retirement, so they'd be withdrawing $20k at 0%, $17.8k at 10%, plus some unspecified amount extra at 15%. Is that a better average rate than the current 15%? Yeah sure, absolutely. Is that better "because the extra 15% can compound" or are they "able to withdraw it tax free"? No, absolutely not.

sherr

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #25 on: April 02, 2014, 02:05:18 PM »
I suppose I may be being too hard on you Knaak, my apologies. I thought you were saying something that you are apparently not saying.

If you were merely trying to suggest that traditional retirement accounts wind up being better for almost everyone so the OP should take a look, then I agree and I'm sorry for making a big deal of it. But it sounded to me like you were suggesting mathematical trickery that does not exist and a 0% tax rate in retirement even though it clearly wouldn't be, and I thought I should respond.

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #26 on: April 05, 2014, 06:21:20 AM »
Thought I'd piggyback on this thread, since I want to optimize my savings.

Wife and I paid an effective federal tax rate of 1.2% after all deductions and tax credits. Most of the time we are retired, we will not have the extra chld deductions.

In a situation like this, I assume maxing out the Roth first is the best strategy? My 401(k) is awful, but the DW has access to most of Fidelity's Spartan funds, so the money will grow well and we can then do a back door.

Thanks.

Edit: post-tax also has the benefit, for us, that our income is relatively variable year to year. I'm never quite sure exactly what our net cash flow is going to be.
« Last Edit: April 05, 2014, 06:24:53 AM by Thegoblinchief »

Bruno

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Re: 401(k) vs Roth IRA vs Taxable Accounts
« Reply #27 on: April 07, 2014, 09:43:32 AM »
Wife and I paid an effective federal tax rate of 1.2% after all deductions and tax credits. Most of the time we are retired, we will not have the extra chld deductions.

In a situation like this, I assume maxing out the Roth first is the best strategy?
I'd say yes, maximizing Roths is best, at least that's what we are doing, after reducing AGI via 403+457.  The good thing is that there is some wiggle room on the income side, as you can contribute to a regular IRA first to further reduce income (and with that tax) up to the tax filing date (April 15).
The big elephant in the room here is the savers credit, as a few hundred $ in lower AGI may get your factor for the savers credit from 0.1 to 0.2 or from 0.2 to 0.5 - resulting in a big increase in the credit you can take (an wiping out some/abig chunk/all taxes due).