I'm 47, in the 22% tax bracket MFJ, current retirement assets in the (very) low 7 digits.
My employer offers a 401(k) with matching contributions, the employer match is always tax-deferred.
My current holdings are roughly 43% tax-deferred, 19% tax free (Roth), and 38% taxable.
I am currently maxing out my (and my spouse's) Roth IRAs, my HSA and 401(k). My contributions to the 401(k) are split roughly equally between the tax-deferred and the tax-free Roth 401(k).
I would absolutely enjoy the lower tax burden of deferring the entire 401(k), but I also look around and don't see how taxes won't be higher in the future. As such, I have decided I wanted to have flexibility between "buckets" to draw income from, and since my "tax-free" bucket is smallest, I am biasing a little towards boosting it up.
I guess one argument is that I should defer the entire 401(k), and then when I retire, live off the taxable account for a few years and convert the tax-deferred as much as possible to Roth while I have minimal income and am in the lowest tax brackets. Is that the prevailing wisdom? What would you do/are you doing?
Thanks for any insight!
My employer offers a 401(k) with matching contributions, the employer match is always tax-deferred.
My current holdings are roughly 43% tax-deferred, 19% tax free (Roth), and 38% taxable.
I am currently maxing out my (and my spouse's) Roth IRAs, my HSA and 401(k). My contributions to the 401(k) are split roughly equally between the tax-deferred and the tax-free Roth 401(k).
I would absolutely enjoy the lower tax burden of deferring the entire 401(k), but I also look around and don't see how taxes won't be higher in the future. As such, I have decided I wanted to have flexibility between "buckets" to draw income from, and since my "tax-free" bucket is smallest, I am biasing a little towards boosting it up.
I guess one argument is that I should defer the entire 401(k), and then when I retire, live off the taxable account for a few years and convert the tax-deferred as much as possible to Roth while I have minimal income and am in the lowest tax brackets. Is that the prevailing wisdom? What would you do/are you doing?
Thanks for any insight!
Statistics: Posted by 41fan — Fri May 24, 2024 2:48 pm — Replies 4 — Views 115