Author Topic: Optimal ratio between trad/Roth/taxable?  (Read 1401 times)

JJ-

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Optimal ratio between trad/Roth/taxable?
« on: August 29, 2021, 01:40:05 PM »
In response to the trad to Roth, more or less thread I have been wondering about how much to put into traditional accounts versus having amounts available in Roth and or taxable accounts. I know at some point dollar amounts in these accounts matter, but for the sake of discussion I'll start it as a ratio.

Our current account balances are something like this:
Trad :$400k  (~50%)
Roth/HSA: $240k (~30%)
Taxable: $190k (~20%)

We are 7 year from FI assuming modest gains and ~20k annual contributions. I've started running scenarios where we swap all of our contributions to Roth while we are expecting to be earning a bit less to eat up most of the 12% bracket. This puts balances between accounts looking like this:

Trad: $579k (~45%)
Roth/HSA: $505k (~35%)
Taxable: $250k (~20%)

Part of me wonders if there is both too much in traditional accounts and also not enough. I've looked at a few spreadsheets around here modeling future taxes and they all make my head spin a bit. Not what it used to be I guess.

We do not expect to RE as soon as we hit FI so balances may continue to climb until we actually pull the plug. Currently we file MFJ mid 30s with 2 kids <4.

I guess there is the added factor of future pensions and potential passive income from of real estate (family farmland rented out) that set a minimum tax floor. The pension will generate $16k in today dollars at FI but will not adjust for inflation until I draw it 20 yrs later. The family farmland details are still a bit vague to us but it's likely $20-30k /yr.  Just typing that out makes me think that leaning Roth is the way to go even converting trad into Roth at 22% levels. But, I've also always done planning that neither would actually show up into our lives. Maybe that's not a great assumption anymore, or i should model both. 

Anyway, I've done a bit of googling and have been unable to find much discussion on this topic. Any thoughts on optimal ratios or resources I should look into? MDM's spreadsheet and various tabs are about the limit of what my brain can handle for modeling purposes these days, but even then I probably have glossed over something there that might help.

Paul der Krake

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #1 on: August 29, 2021, 01:53:28 PM »
Nobody knows their perfect bucket allocation, let alone someone else's, because the future is uncertain. Rules change, life circumstances change, priorities change.

Personally, I spend half the time thinking I have too much in taxable and the other half thinking I don't have enough in taxable.

But you're asking the right questions!

My recommendation is to hedge your odds try to have a bit in every bucket. It likely will not be the best strategy, but it will be a flexible strategy.

Also, keep in mind that the value of an additional, optimized dollar will go down as you age.


Morning Glory

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #2 on: August 29, 2021, 02:47:47 PM »
When I left my old employer I did a lump sum rollover of my pension into my tIRA. Can't remember which calculator I used but the lump sum won out over the annuity by a large margin.

I don't know if there's a perfect mix of buckets, but there are ways to move things from one bucket to another without incurring penalties. There are a ton of resources on the forum about that.

JJ-

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #3 on: August 29, 2021, 03:00:41 PM »
When I left my old employer I did a lump sum rollover of my pension into my tIRA. Can't remember which calculator I used but the lump sum won out over the annuity by a large margin.

I don't know if there's a perfect mix of buckets, but there are ways to move things from one bucket to another without incurring penalties. There are a ton of resources on the forum about that.
Mine is a federal pension and the amount I've paid in is maybe $8k (0.8% of salary for 11 years).  Even though the pension is not inflation adjusted until 62 i think that the value of keeping the pension contributions in the system is greater than what I'd get outside the system. Good point though where most pensions are not as valuable.

reeshau

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #4 on: August 29, 2021, 03:11:58 PM »
I think ratios are very difficult for comparison purposes.  In some ways it is not necessarily relevant, as I don't think taking advantage of a savings / tax favorable opportunity is a bad thing.

However, there are some considerations for planning your taxable account:

1) It is the only one fully accessible to you before age 59 1/2 without penalty.  (Yes, you can mega backdoor Roth, but only the converted contributions are available)

2)  Even if you have a good Roth balance, you want to generate some taxable income to stay above the ACA floor for poverty.  Yes, you can synthesize this with Roth conversions and separate withdrawals of 5-year-old contributions.

3)  Roths and HSA's can be good insurance against spending spikes, whether from healthcare, home repair, or higher education expenses.

#3 is essentially my plan.  I look to my taxable account to cover our spending budget.  (10 years, in my case)  I had a large cash cushion coming from the US to Ireland, which I used to resettle--to buy a car and a house, without incurring a tax jump.  I will convert trad to Roth as I have tax bracket room, but that is more around heading off RMD's later on--plenty of time.  Since both will be fully available at 59 1/2, I am not otherwise specifically targeting one over the other--I would not convert into higher tax brackets to manage the balance of the two accounts.

Once the taxable can handle your ER years, there is no need to worry about it.  Of course, it will also be the recipient of surplus savings, and eventually RMD's in excess of spending, so it will swell later, anyway.  Even in your ER years, you can only contribute more to IRA's with earned income, so if you run into windfalls they will also go to the taxable account.
« Last Edit: August 29, 2021, 03:16:07 PM by reeshau »

MDM

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #5 on: August 29, 2021, 04:18:45 PM »
Trad: $579k (~45%)
Roth/HSA: $505k (~35%)
Taxable: $250k (~20%)
...
Any thoughts on optimal ratios...?
Sure would be nice if ratios would suffice, as that would make "one size fits all" advice much easier.

Alas, the IRS insists on enforcing tax laws that use absolute dollar amounts, so it is those amounts that matter.

With the amounts above, even with $30K/yr from farm rental, you would be well within the 12% bracket for trad->Roth conversions of any reasonable size.  What your marginal tax rate would be is a different question, and one you should estimate (accounting for any effects - ACA, etc., - that are relevant).

If you can save 22% on traditional contributions now vs. pay 12% on traditional withdrawals/conversions later, that would be a good deal.

JJ-

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #6 on: August 29, 2021, 07:32:10 PM »
Trad: $579k (~45%)
Roth/HSA: $505k (~35%)
Taxable: $250k (~20%)
...
Any thoughts on optimal ratios...?
Sure would be nice if ratios would suffice, as that would make "one size fits all" advice much easier.

Alas, the IRS insists on enforcing tax laws that use absolute dollar amounts, so it is those amounts that matter.

With the amounts above, even with $30K/yr from farm rental, you would be well within the 12% bracket for trad->Roth conversions of any reasonable size.  What your marginal tax rate would be is a different question, and one you should estimate (accounting for any effects - ACA, etc., - that are relevant).

If you can save 22% on traditional contributions now vs. pay 12% on traditional withdrawals/conversions later, that would be a good deal.
Alas, yes, that's the way it works. Thanks for reeling in my tax fear brain.

Mr. Green

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #7 on: August 29, 2021, 07:44:09 PM »
Trad: $579k (~45%)
Roth/HSA: $505k (~35%)
Taxable: $250k (~20%)
...
Any thoughts on optimal ratios...?
Sure would be nice if ratios would suffice, as that would make "one size fits all" advice much easier.

Alas, the IRS insists on enforcing tax laws that use absolute dollar amounts, so it is those amounts that matter.

With the amounts above, even with $30K/yr from farm rental, you would be well within the 12% bracket for trad->Roth conversions of any reasonable size.  What your marginal tax rate would be is a different question, and one you should estimate (accounting for any effects - ACA, etc., - that are relevant).

If you can save 22% on traditional contributions now vs. pay 12% on traditional withdrawals/conversions later, that would be a good deal.
+1. Your tax rate now vs. expected rate later is going to drive this decision.

JJ-

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #8 on: August 29, 2021, 07:54:50 PM »
Trad: $579k (~45%)
Roth/HSA: $505k (~35%)
Taxable: $250k (~20%)
...
Any thoughts on optimal ratios...?
Sure would be nice if ratios would suffice, as that would make "one size fits all" advice much easier.

Alas, the IRS insists on enforcing tax laws that use absolute dollar amounts, so it is those amounts that matter.

With the amounts above, even with $30K/yr from farm rental, you would be well within the 12% bracket for trad->Roth conversions of any reasonable size.  What your marginal tax rate would be is a different question, and one you should estimate (accounting for any effects - ACA, etc., - that are relevant).

If you can save 22% on traditional contributions now vs. pay 12% on traditional withdrawals/conversions later, that would be a good deal.
+1. Your tax rate now vs. expected rate later is going to drive this decision.

I think what I am not sure if is what traditional balances would be when we would start withdrawing funds as well as what the RMD calculations actually look like. There is likely some aversion to the unknown assuming it will be "bad", but until I do the calcs i likely will not know. Until then sticking with filling 12% space with Roth contributions is where we're going to go. I doubt our marginal tax rate will be lower than that "someday".

Mr. Green

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #9 on: August 29, 2021, 09:23:36 PM »
Trad: $579k (~45%)
Roth/HSA: $505k (~35%)
Taxable: $250k (~20%)
...
Any thoughts on optimal ratios...?
Sure would be nice if ratios would suffice, as that would make "one size fits all" advice much easier.

Alas, the IRS insists on enforcing tax laws that use absolute dollar amounts, so it is those amounts that matter.

With the amounts above, even with $30K/yr from farm rental, you would be well within the 12% bracket for trad->Roth conversions of any reasonable size.  What your marginal tax rate would be is a different question, and one you should estimate (accounting for any effects - ACA, etc., - that are relevant).

If you can save 22% on traditional contributions now vs. pay 12% on traditional withdrawals/conversions later, that would be a good deal.
+1. Your tax rate now vs. expected rate later is going to drive this decision.

I think what I am not sure if is what traditional balances would be when we would start withdrawing funds as well as what the RMD calculations actually look like. There is likely some aversion to the unknown assuming it will be "bad", but until I do the calcs i likely will not know. Until then sticking with filling 12% space with Roth contributions is where we're going to go. I doubt our marginal tax rate will be lower than that "someday".
I would think that's a fairly safe bet if you're expecting some pension and rental income

MDM

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #10 on: August 29, 2021, 09:55:57 PM »
...what the RMD calculations actually look like. There is likely some aversion to the unknown assuming it will be "bad", but until I do the calcs i likely will not know.
The calculation is simple: the RMD for a given year is the IRA balance on 31-Dec of the previous year, divided by an age-dependent number.

See Current Vs. New Uniform Lifetime Table RMD and Retirement Plans FAQs regarding Required Minimum Distributions | Internal Revenue Service for gory details.

E.g., for someone turning 75 in 2021 whose traditional balance on 31-Dec-2020 was $600K, the 2021 RMD is $600K/22.9 = $26.2K.

FLBiker

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #11 on: August 30, 2021, 07:00:52 AM »
Lots of good thoughts here.  When I was younger (and not earning very much) and working overseas (thus paying little tax AND not having a lot of retirement account options), I was very much a "pay taxes now" frame of mind and maxed my Roth IRA and put the rest in taxable.  Then I got a 9 to 5 in the US and switched to the tax-defer as much as possible camp.  We maxed out 403bs, 457s and TIRAs, thinking we could Roth ladder in the future.  Then we moved to Canada last year, meaning the Roth ladder isn't available, so we did a TIRA to RIRA conversion before the move (paying a chunk of taxes).  And now that we're at our FI number, more or less, and planning to downshift, I'm grateful for all the money we have in taxable (which has traditionally been my least favorite bucket) because the cost basis reset when we moved to Canada so the taxes we'll pay on it will be quite reasonable.

All that's simply to say who knows?  I like the idea of having some in each bucket.  Here are our ratios:
403b       48%
RIRA     21%
Taxable 18%
457      14%

So we'll definitely be paying some taxes in the future as we draw from the 403b and 457, but we'll use the RIRA and Taxable to keep us in lower brackets.  At least, that's the plan.  And honestly, since we just moved to Canada last year, I'm happy to pay taxes here as we haven't been contributers for most of our working lives.  In early retirement, we'll do a combo of taxable and 457, and then once we're at the age limits, we'll do a combo of the RIRA and 403b.  At least, that's the plan.

secondcor521

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #12 on: August 30, 2021, 07:38:11 AM »
I'm 52, single, three college aged offspring, and my ratios are about 6.5:2.8:1.

It's an excellent question.

What's done is done.  You are where you are.  So I wouldn't spend too much time worrying about your current ratios.  They are now simply an input into your plan for what to do in the future.

What you do in the future, really, comes down mostly to three things I think:

1.  What your (taxable) income curve will look like.  By this I mean the typical thing for a FIRE-type person here would be increasing income throughout your career, then a lower income period during FIRE, then probably higher income later as SS / pensions / RMDs come on line.  Think of a graph of AGI by year for the rest of your life.

2.  What your spending curve will look like.  This could be driven by college costs, medical expenses, large purchases like a second home, travel.  You could plan to spend a lot early, or spend evenly, or spend more as your investments grow, or whatever.  If this doesn't line up well with #1, then you'll probably have to have some sort of plan to draw from your savings when your income is low and your spending is high (e.g., you just FIREd and want to do a major home remodel or a world cruise), which may in turn generate taxable income (e.g., you just sold $100K of TSLA to pay for it).

3.  Tax rules.  Really most of what you do from here on out - to do it well IMHO - will depend on tax rules.  You can get lost in the minutiae (I do), but given that tax rules are changed regularly, it's probably silly to do so.  If you read, you'll eventually come across most or all of the good tools out there for managing taxes - Roth conversions, 529s, ACA subsidies, HSAs, QCDs.

In the big scheme of things, we have a progressive tax system, and we probably will for a long while to come.  So the biggest single thing I think you can do is either defer or accelerate taxation of your income in order to have your income taxed at the low rates and not the high rates.  A relatively easy way to do this is to try to figure out what your lifetime tax rates are going to be (by looking at the curves in #1 and #2 above) and then see if you can level out your lifetime tax rate and what that rate will probably be.  Suppose, for example, that it's 22%.

Once you know that, you can try to pay taxes / accelerate / recognize income when it looks like your rate will be below that 22% number.  This could be things like Roth conversions in FIRE, or deciding to do Roth contributions instead of 401(k) contributions, or capital gain harvesting.  Or, if it looks like you'll be above that 22% number, you can try to defer taxation (as long as there is a future year where you will probably be below the number again).  This would be things like 401(k) contributions, HSA contributions, etc.

There are several limits to doing this perfectly:

1.  We don't know the future.  Tax laws will change, your situation will change, your goals will change in ways you can't plan for.  Investments will return more or less than you think.  Costs will be more or less than you predict.

2.  Even if we had all the data, most of us can't do optimization models well enough to get the ideal answer.  I once tried to optimize my taxes and just limited my model to my tax situation and the next five years.  I think my "simple" model had about three hundred rows (times five columns).  Ultimately I found several coding errors (and I'm a reasonably good coder and fairly knowledgeable about Excel) and then the rules changed and my kids' college plan changed and I learned enough to where the model fell apart under it's own weight.  And this was just trying to model my 1040; it ignored HSAs, RMDs, QCDs, cash flow considerations, possible inheritances, etc.

At the end of the day, especially since you indicated that you'll probably work several years past the FI point before REing, you're probably going to end up having way more than enough.  Then it becomes a different set of problems - how to bequeath or donate as effectively as possible, and how to give up on the psychological compulsion to do things absolutely ideally (or how to succeed at doing so, I guess).  But you'll figure this out in about 12-15 years.

The nice thing is that if you're in the realm of FIRE, financial planning can work pretty well with a wide set of ratios.  What ends up happening is that if you continuously look at where you are in your current state, look at where you're heading (predict out your RMDs, for example), and make decently good choices as you go along, you'll end up succeeding.  And in situations where the analysis indicates that tacking hard to the left on some financial lever is best, the analysis will show that and it's an easy decision.  If the analysis is wishy-washy, then it's hard to tell what the "best" answer is (like when to start SS), but generally in those cases then it doesn't matter much which you choose because there is a wide plain where a range of answers is within the capability of planning.

I guess the last thing I would add is to not have regrets.  I don't look back and figure out what my unvested stock options would be worth today if I had just stayed on the job a bit longer.  I don't beat myself up (too much, anyway) over not being 100% optimal with my kids' college funding.  I don't get mad for saving too much and facing high tax rates when I'm 72 (if I make it that long knock wood).  I'm not upset at my Mom for being super excited about the stretch IRA only to have it essentially go away, especially since it went away about three years after she died.  I try to make good decisions with what I know, look towards the future, and appreciate and be grateful for where I am and my good fortune.  I try to learn from my mistakes where I can - the college funding mistakes I made I can at least avoid for my youngest two kids' last three years of school, for example.  And I try to be a good steward of what I have.

HTH.

Car Jack

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #13 on: August 30, 2021, 09:01:25 AM »
It's all about the taxes now, the taxes once you stop working and where your money goes otherwise.

If you're in a high bracket, a Roth doesn't make sense.  Do 401k's and take the high rate savings now.

If you're in a low bracket now, then fill up that Roth first. 

If you make more money than you need and easily fill up 401k's and have money set for Roth (assuming you don't go above the income), then it's time to fill other things.  529 if you have kids heading to college.  Savings bonds.  Taxable account.

We're in the last category and easily fill 2 401k's and set aside $14k for Roths (which we won't be able to do this year) and put a bunch in taxable and $5k in federal refund as iBonds (paper).

At retirement, I've got enough in eFunds to get through a year or even 2 if we don't do that dream trip to Germany to pick up a $100k Porsche.  :D   At that point, it's Extreme Accounting, retirement income edition.  I'll pull money out of my tIRA up to whatever bracket makes the most sense.  I'll have the ability to pull out of Roths for added tax free income.  The goal is to pay little or not tax and whittle down those tIRA accounts to reduce future RMDs.  For now, the standard deduction for MFJ is $25.1k for tax year 2021.  I do know that as the years progress, our taxes are going to grow in retirement, so perhaps I'll do planning and find that it makes sense to drain more out of those tIRAs early on.  We'll see.

JJ-

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Re: Optimal ratio between trad/Roth/taxable?
« Reply #14 on: August 30, 2021, 10:26:28 AM »
See Current Vs. New Uniform Lifetime Table RMD and Retirement Plans FAQs regarding Required Minimum Distributions | Internal Revenue Service for gory details.

Thank you. This demystifies it a fair bit. I see why RMDs can really swell if the pre tax accounts are left to grow sort of untrimmed.

Lots of good thoughts here.  When I was younger (and not earning very much) and working overseas (thus paying little tax AND not having a lot of retirement account options), I was very much a "pay taxes now" frame of mind and maxed my Roth IRA and put the rest in taxable.  Then I got a 9 to 5 in the US and switched to the tax-defer as much as possible camp.  We maxed out 403bs, 457s and TIRAs, thinking we could Roth ladder in the future.  Then we moved to Canada last year, meaning the Roth ladder isn't available, so we did a TIRA to RIRA conversion before the move (paying a chunk of taxes).  And now that we're at our FI number, more or less, and planning to downshift, I'm grateful for all the money we have in taxable (which has traditionally been my least favorite bucket) because the cost basis reset when we moved to Canada so the taxes we'll pay on it will be quite reasonable.

All that's simply to say who knows?  I like the idea of having some in each bucket.  Here are our ratios:
403b       48%
RIRA     21%
Taxable 18%
457      14%

So we'll definitely be paying some taxes in the future as we draw from the 403b and 457, but we'll use the RIRA and Taxable to keep us in lower brackets.  At least, that's the plan.  And honestly, since we just moved to Canada last year, I'm happy to pay taxes here as we haven't been contributers for most of our working lives.  In early retirement, we'll do a combo of taxable and 457, and then once we're at the age limits, we'll do a combo of the RIRA and 403b.  At least, that's the plan.


The bolded part made me laugh because it too has often been my step child (why would I pay taxes twice come on), but it seems that lately my preference for type of account seems to hem and haw based on the direction of the wind. Before I get myself destroyed for the taxed twice comment yes I understand that there are ways to minimize/reduce tax burden of gains lol.

What's done is done.  You are where you are.  So I wouldn't spend too much time worrying about your current ratios.  They are now simply an input into your plan for what to do in the future.

What you do in the future, really, comes down mostly to three things I think:

I know in the past I've done what I thought was best. Of course there's always the stuff you want to kick yourself for, but agreed it's done and all we can do is move on to the future.

What you do in the future, really, comes down mostly to three things I think:

1.  What your (taxable) income curve will look like.  By this I mean the typical thing for a FIRE-type person here would be increasing income throughout your career, then a lower income period during FIRE, then probably higher income later as SS / pensions / RMDs come on line.  Think of a graph of AGI by year for the rest of your life.

2.  What your spending curve will look like.  This could be driven by college costs, medical expenses, large purchases like a second home, travel.  You could plan to spend a lot early, or spend evenly, or spend more as your investments grow, or whatever.  If this doesn't line up well with #1, then you'll probably have to have some sort of plan to draw from your savings when your income is low and your spending is high (e.g., you just FIREd and want to do a major home remodel or a world cruise), which may in turn generate taxable income (e.g., you just sold $100K of TSLA to pay for it).

I'll add a component to this. I think the part in brackets made me think about the role of which accounts are drained throughout the process, so really trying to visualize what the various pre/post/taxable accounts looked like. It kinda made me think that the taxable account balances start high and end high compared to income realized from pretax accounts. The spending curve is not always 1:1 with the taxable income.


In the big scheme of things, we have a progressive tax system, and we probably will for a long while to come.  So the biggest single thing I think you can do is either defer or accelerate taxation of your income in order to have your income taxed at the low rates and not the high rates.
...

There are several limits to doing this perfectly:

1.  We don't know the future.

2.  Even if we had all the data, most of us can't do optimization models well enough to get the ideal answer.  I once tried to optimize my taxes and just limited my model to my tax situation and the next five years... the model fell apart under it's own weight. 

I think in the past, for me, let's say 7 years ago, I would have jumped at the opportunity to try and optimize all of this stuff out and run several scenarios. I laughed at the comment about the model falling apart under it's own weight and I can imagine myself spending countless hours on this and then throwing the keyboard because I couldn't figure out how to do everything I wanted to do with it.

Re : #1, I looked back recently to old tax brackets when I first started working as I was curious what they were compared to now. I remember somebody telling me I needed to contribute to a ROTH while I was in the 25% tax bracket. Who would have thought I'd be making relatively much more money now and paying a lower marginal rate? Kinda goes back to the first point of what's done is done.

At the end of the day, especially since you indicated that you'll probably work several years past the FI point before REing, you're probably going to end up having way more than enough.  Then it becomes a different set of problems - how to bequeath or donate as effectively as possible, and how to give up on the psychological compulsion to do things absolutely ideally (or how to succeed at doing so, I guess).  But you'll figure this out in about 12-15 years.

The nice thing is that if you're in the realm of FIRE, financial planning can work pretty well with a wide set of ratios.
One of the weirdest things I've felt is this sensation of liberty knowing how close we are to FI, especially given the weight of needing to work to pay off 6 figure student loans and keep a roof over my head. The possibilities are opening up quite a bit in discussions with DW on what we want life to look like in 5 years, 10 years, etc., and all of those are becoming much more concrete. FI for current life may be more or less than we actually needed, and I'm starting to feel like I can let go about needing to be the focus of my attention. Hence, the lack of mental fortitude to be able to dive into detailed spreadsheets. There's some joke here about kids/life being able to take up the mental energy I need to do so, just not able to find it right now.

Until topics like this come up and I obsessively wonder about them trying to put us in the ideal situation. Seems like there's no ideal ratio as each bit comes with its own set of problems and dilemmas (albeit mostly mental dilemmas on do I have too much or not enough in one bucket). Grass is always greener or something.

HTH.
absolutely. Thank you.

I do know that as the years progress, our taxes are going to grow in retirement, so perhaps I'll do planning and find that it makes sense to drain more out of those tIRAs early on.  We'll see.
I think the biggest thing I've digested over the last month or two is how optimal it is to be able to put into ROTH at the 12%. Sure, at some point we may be able to be taxed at a lower rate given changes in income or changes in tax law, but the models where we stick with max traditional contributions put IRA balances much too high and leaves us eventually converting them at 12% (or higher after 2026 I think) to get them out of those accounts. Might as well start now as it doesn't look like income will be going lower anytime soon.