American Funds US Government MMkt R6-RAFXX-US Fund Money Market - Taxable-0.34%
Vanguard Interm-Term Bond Index Adm-VBILX-US Fund Intermediate-Term Bond-0.07%
AB Global Bond Advisor-ANAYX-US Fund World Bond-0.58%
American Funds American Balanced R6-RLBGX-US Fund Allocation--50% to 70% Equity-0.29%
Vanguard 500 Index Admiral-VFIAX-US Fund Large Blend-0.05%
American Funds Invmt Co of Amer R6-RICGX-US Fund Large Blend-0.30%
Vanguard Growth Index Admiral-VIGAX-US Fund Large Growth-0.06%
Victory Sycamore Established Value R-VEVRX-US Fund Mid-Cap Value-0.59%
Janus Henderson Enterprise N-JDMNX-US Fund Mid-Cap Growth-0.68%
Wells Fargo Special Small Cap Value-ESPNX-US Fund Small Value-0.95%
T. Rowe Price QM US Small-Cap Gr Eq-TQAIX-US Fund Small Growth-0.66%
DFA Global Equity-DGEIX-US Fund World Large Stock-30%
DFA International Core Equity-DFIEX-US Fund Foreign Large Blend-0.30%
Oppenheimer International Growth-OIGIX-US Fund Foreign Large Growth-0.70%
American Funds New World R6-RNWGX-US Fund Diversified Emerging Mkts-0.65%
Columbia Seligman Comms & Info R5-SCMIX-US Fund Technology-0.97%
EValuator Very Conservative RMS Ser-EVVLX-US Fund Allocation--15% to 30% Equity-0.86%
EValuator Conservative RMS Service-EVCLX-US Fund Allocation--15% to 30% Equity-0.85%
EValuator Tactically Managed RMS Ser-EVTTX-US Fund Tactical Allocation-1.28%
EValuator Moderate RMS Service-EVMLX-US Fund Allocation--50% to 70% Equity-0.83%
EValuator Growth RMS Service-EVGLX-US Fund Allocation--70% to 85% Equity-0.85%
EValuator Aggressive RMS Service-EVAGX-US Fund Allocation--85%+ Equity-0.89%
Vanguard Interm-Term Bond Index Adm-VBILX-US Fund Intermediate-Term Bond-0.07%
Vanguard 500 Index Admiral-VFIAX-US Fund Large Blend-0.05%
Vanguard Growth Index Admiral-VIGAX-US Fund Large Growth-0.06%
My company offers two retirement plans - Regular 403(b) and Roth 403(b) - which one should I go with? My initial reaction was to go with Regular 403(b) but had 2nd thoughts as I already have Roth 401k fund. Stay with Roth 403(b) to make my life easier?The answer to the traditional vs. Roth question depends on the marginal tax savings you would get from traditional contributions now vs. the marginal tax rate you would pay on withdrawals from those contributions later.
QuoteVanguard Interm-Term Bond Index Adm-VBILX-US Fund Intermediate-Term Bond-0.07%
Vanguard 500 Index Admiral-VFIAX-US Fund Large Blend-0.05%
Vanguard Growth Index Admiral-VIGAX-US Fund Large Growth-0.06%
You should pick from the above funds. I would recommend the regular 403b in your position.
QuoteVanguard Interm-Term Bond Index Adm-VBILX-US Fund Intermediate-Term Bond-0.07%
Vanguard 500 Index Admiral-VFIAX-US Fund Large Blend-0.05%
Vanguard Growth Index Admiral-VIGAX-US Fund Large Growth-0.06%
You should pick from the above funds. I would recommend the regular 403b in your position.
I thought so too, really can't go wrong with Vanguard. I think I'll go with 500 Index Admiral.
Why do you think that the regular 403b is the way to go? I'd like to hear your feedback.
QuoteVanguard Interm-Term Bond Index Adm-VBILX-US Fund Intermediate-Term Bond-0.07%
Vanguard 500 Index Admiral-VFIAX-US Fund Large Blend-0.05%
Vanguard Growth Index Admiral-VIGAX-US Fund Large Growth-0.06%
You should pick from the above funds. I would recommend the regular 403b in your position.
I thought so too, really can't go wrong with Vanguard. I think I'll go with 500 Index Admiral.
Why do you think that the regular 403b is the way to go? I'd like to hear your feedback.
It's just my guess based on your income and savings rate. As MDM said, you need to do calculations specific to your situation and assumptions to make a more accurate decision between the two.
Are you sure you have to roll over your CalPers fund?
Is this a 401/403/457, or actually part of their pension fund?
If it is the pension fund, are you SURE you won't ever work in a job with CalPers again? Or is the pension plan just that crummy?
I know here in Texas that if you ever go back to working for the State, having your prior "state time" still in the pension is very helpful for later actually drawing on that pension - you stay "grandfathered" under the older rules. The pension rules have been getting steadily worse for new employees.
Are you sure you have to roll over your CalPers fund?
Is this a 401/403/457, or actually part of their pension fund?
If it is the pension fund, are you SURE you won't ever work in a job with CalPers again? Or is the pension plan just that crummy?
I know here in Texas that if you ever go back to working for the State, having your prior "state time" still in the pension is very helpful for later actually drawing on that pension - you stay "grandfathered" under the older rules. The pension rules have been getting steadily worse for new employees.
I was actually recommended by HR to roll it over as I will lose it in two years if I don't go back within that timeframe. With high cost of living in Bay Area, and the state's crappy salary range - I don't think I will be going back.
Maybe I can leave it there for one more year then plan from there.
Yes, I saw MDM's comments and did the case study spreadsheet - it looks like I'm better off with Regular 403b due to taxes now.You will always pay less (or the same if both are $0) tax now (when contributing) using a traditional 403b vs. a Roth.
Roth 403b - I pay 10K in 1040 tax
Regular 403b - I pay 6k in 1040 tax
Yes, I saw MDM's comments and did the case study spreadsheet - it looks like I'm better off with Regular 403b due to taxes now.You will always pay less (or the same if both are $0) tax now (when contributing) using a traditional 403b vs. a Roth.
Roth 403b - I pay 10K in 1040 tax
Regular 403b - I pay 6k in 1040 tax
You will always pay more (or the same if both are $0) tax later (when withdrawing) using a traditional 403b vs. a Roth.
Make the choice by avoiding the whichever has the higher tax percentage on the traditional amount.
And I determine the percentage based on my income when I retire correct?Correct. And everything is difficult until it isn't. ;)
I know it sounds really simple but I'm having a hard time "getting" it.
And I determine the percentage based on my income when I retire correct?Correct. And everything is difficult until it isn't. ;)
I know it sounds really simple but I'm having a hard time "getting" it.
See the commutative property of multiplication (https://www.bogleheads.org/wiki/Traditional_versus_Roth#Taxes) as it applies to this issue. Does that help?
Basically it makes no difference if I'm at same tax bracket. Got it.Close. It makes no difference if you have the same marginal tax rate (https://www.bogleheads.org/wiki/Marginal_tax_rate). That may or may not be the same as your bracket.
If I make it all Roth accounts - my income will be only Social Security ($22k) which puts me in 15% bracket regardless of how much I withdraw from Roth accounts.If it is only SS and Roth, you will pay no federal tax at all.
If I have Roth AND Traditional accounts - my income will probably be in the 25% bracket - due to withdrawing from traditional account...Depends on exactly how much of each.
QuoteIf I have Roth AND Traditional accounts - my income will probably be in the 25% bracket - due to withdrawing from traditional account...Depends on exactly how much of each.
See Investment Order (https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153), in particular the discussion and footnotes for #4.
QuoteYou should not invest entirely in Roths for your whole career, as you would then retire in a 0% bracket, but you should generally prefer Roths, using traditional accounts for those years you happen to be in higher tax brackets, or for years later in your career if you have too much in Roths.
Yes, it's not the most straightforward thing. If you go through these steps:Yes, I have read the Investment Order and the links at #4 and I'm still confused.If I have Roth AND Traditional accounts - my income will probably be in the 25% bracket - due to withdrawing from traditional account...Depends on exactly how much of each.
See Investment Order (https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153), in particular the discussion and footnotes for #4.
1) Include any guaranteed pension amount that you can't defer in return for higher payments when you do start 2) Take current traditional balance and predict value at retirement (e.g., with Excel's FV function) using a conservative real return, maybe 3% or so. Take 4% of that value as an annual withdrawal. 3) Take current taxable balance and predict value at retirement (e.g., with Excel's FV function) using a conservative real return, maybe 3% or so. Take 2% of that value as qualified dividends. 4a) Decide whether SS income should be considered, or whether you will be able to do enough traditional->Roth conversions before taking SS. 4b) Include SS income projections (using today's dollars) if needed from step 4a. 5) Calculate marginal rate using today's tax law on the numbers from step 1-4. 6) Make your traditional vs. Roth decision for this year's contribution |
It's not bad per se to pay 0% in retirement, but it does indicate a missed opportunity if you are paying >0% now and are using all Roth. That's because Roth gets you get no tax savings now. If you use some traditional now you get tax savings, and if your retirement rate is 0% you've done the trick of never paying tax on that money.QuoteYou should not invest entirely in Roths for your whole career, as you would then retire in a 0% bracket, but you should generally prefer Roths, using traditional accounts for those years you happen to be in higher tax brackets, or for years later in your career if you have too much in Roths.This is from the Traditional vs Roth link. I do not understand why being in 0% bracket is a bad thing?
Yes, it's not the most straightforward thing. If you go through these steps:Yes, I have read the Investment Order and the links at #4 and I'm still confused.If I have Roth AND Traditional accounts - my income will probably be in the 25% bracket - due to withdrawing from traditional account...Depends on exactly how much of each.
See Investment Order (https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153), in particular the discussion and footnotes for #4....where does the confusion start?
1) Include any guaranteed pension amount that you can't defer in return for higher payments when you do start
2) Take current traditional balance and predict value at retirement (e.g., with Excel's FV function) using a conservative real return, maybe 3% or so. Take 4% of that value as an annual withdrawal.
3) Take current taxable balance and predict value at retirement (e.g., with Excel's FV function) using a conservative real return, maybe 3% or so. Take 2% of that value as qualified dividends.
4a) Decide whether SS income should be considered, or whether you will be able to do enough traditional->Roth conversions before taking SS.
4b) Include SS income projections (using today's dollars) if needed from step 4a.
5) Calculate marginal rate using today's tax law on the numbers from step 1-4.
6) Make your traditional vs. Roth decision for this year's contribution
QuoteIt's not bad per se to pay 0% in retirement, but it does indicate a missed opportunity if you are paying >0% now and are using all Roth. That's because Roth gets you get no tax savings now. If you use some traditional now you get tax savings, and if your retirement rate is 0% you've done the trick of never paying tax on that money.QuoteYou should not invest entirely in Roths for your whole career, as you would then retire in a 0% bracket, but you should generally prefer Roths, using traditional accounts for those years you happen to be in higher tax brackets, or for years later in your career if you have too much in Roths.This is from the Traditional vs Roth link. I do not understand why being in 0% bracket is a bad thing?
In general, if the tax rate you pay in retirement is lower (doesn't have to be 0%, just lower) than what you pay now, traditional is better than Roth.
Assume you have $9600K/yr in pension, no traditional balance, $30K in taxable investment (e-fund doesn't count), 20 years to retirement, no SS income,Yes, it's not the most straightforward thing. If you go through these steps:Yes, I have read the Investment Order and the links at #4 and I'm still confused.If I have Roth AND Traditional accounts - my income will probably be in the 25% bracket - due to withdrawing from traditional account...Depends on exactly how much of each.
See Investment Order (https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153), in particular the discussion and footnotes for #4....where does the confusion start?
1) Include any guaranteed pension amount that you can't defer in return for higher payments when you do start
2) Take current traditional balance and predict value at retirement (e.g., with Excel's FV function) using a conservative real return, maybe 3% or so. Take 4% of that value as an annual withdrawal.
3) Take current taxable balance and predict value at retirement (e.g., with Excel's FV function) using a conservative real return, maybe 3% or so. Take 2% of that value as qualified dividends.
4a) Decide whether SS income should be considered, or whether you will be able to do enough traditional->Roth conversions before taking SS.
4b) Include SS income projections (using today's dollars) if needed from step 4a.
5) Calculate marginal rate using today's tax law on the numbers from step 1-4.
6) Make your traditional vs. Roth decision for this year's contribution
I don't have any traditional balance lol.
Can you give me an example using the above steps? It will help me see it and put it together.
G2: 1 G3: 1 G8: 38 B26: =1084/12 B27: 800 |
It seems that the only way I get 0-15% is to do roth conversions when I'm unemployed.Or retired?
Assume you have $9600K/yr in pension, no traditional balance, $30K in taxable investment (e-fund doesn't count), 20 years to retirement, no SS income,
Can you give me an example using the above steps? It will help me see it and put it together.
1. $9600K/yr
2. $0
3. In EXCEL: =FV(0.03,20,0,-30000,0) This gives $54,183. Taking 2% of that give $1084/yr in dividends.
4. $0
5. Using the case study spreadsheet (http://forum.mrmoneymustache.com/forum-information-faqs/case-study-spreadsheet-updates/), enter on the 'Calculations' tabFor a quick look, see cell N30 for the marginal rate of ordinary income (e.g., a tIRA withdrawal). With the numbers given, the answer is 0%.
G2: 1
G3: 1
G8: 38
B26: =1084/12
B27: 800
For a better overview, see the 'Instructions' tab starting in cell B15 and change the "Column input cell" to B25. You should get a chart similar to
(http://s13.postimg.org/ez1xwm1mf/screenshot_132.png)
That confirms the 0% marginal rate on tIRA withdrawals because, currently, you have a $0 traditional balance. If you expected a $200K traditional balance in retirement, taking 4% of that would be $8K/yr and the marginal rate at that point is 10%.
With the situation outline above, you would conclude that for this year, your contribution should be traditional because whatever your current marginal rate it is >0%.
Does that make sense?
G2: 1 G3: 1 G8: 38 B26: =9,211.16/12 B27: 0 Still 0% on tIRA withdrawals. Quote Well, yes but I would need to be sure that I have enough roth/taxable money to live off then I can touch the converted roth money from traditional. However it looks like Traditional is the way to go for me. |
Assume you have $9600K/yr in pension, no traditional balance, $30K in taxable investment (e-fund doesn't count), 20 years to retirement, no SS income,Since nobody has made a joke yet - If you're vested in a pension that will pay $9600K per year, I'm thinking the play is to stop worrying about money and buy a yacht.
Assume you have $9600K/yr in pension, no traditional balance, $30K in taxable investment (e-fund doesn't count), 20 years to retirement, no SS income,Since nobody has made a joke yet - If you're vested in a pension that will pay $9600K per year, I'm thinking the play is to stop worrying about money and buy a yacht.
3. In EXCEL: =FV(0.03,20,0,-255000,0) This gives $$460,558.36. Taking 2% of that give $9,211.16/yr in dividends.Don't use your Roth balances here. Withdrawals from Roth accounts are assumed to be tax free and thus don't enter into the tax calculation. This will make traditional even more the way to go for you.
...I would need to be sure that I have enough roth/taxable money to live off then I can touch the converted roth money from traditional.Yes, as How to withdraw funds from your IRA and 401k without penalty before age 59.5 (https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/) discusses.
3. In EXCEL: =FV(0.03,20,0,-255000,0) This gives $$460,558.36. Taking 2% of that give $9,211.16/yr in dividends.Don't use your Roth balances here. Withdrawals from Roth accounts are assumed to be tax free and thus don't enter into the tax calculation. This will make traditional even more the way to go for you.Quote...I would need to be sure that I have enough roth/taxable money to live off then I can touch the converted roth money from traditional.Yes, as How to withdraw funds from your IRA and 401k without penalty before age 59.5 (https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/) discusses.
Yes, that would be one of those people TFB had in mind when writing Most TSP Participants Should Switch To the Roth TSP (https://thefinancebuff.com/most-tsp-participiants-should-switch-to-the-roth-tsp.html). ;)Assume you have $9600K/yr in pension, no traditional balance, $30K in taxable investment (e-fund doesn't count), 20 years to retirement, no SS income,Since nobody has made a joke yet - If you're vested in a pension that will pay $9600K per year, I'm thinking the play is to stop worrying about money and buy a yacht.