I could use some help in evaluating, at a high level, whether to make Roth contributions in my 401k or conversions, either now or in early retirement. My understanding is that if my future tax rate is lower than my current one, I should favor traditional 401k contributions, but if I and my wife retire at 55, we'll have the opportunity to do Roth conversions to bridge from retirement to age 59.5 as well as well ahead of RMDs. We would have our taxable portfolio to draw from and limited Roth contributions before age 59.5. However, I have two questions. 1-is there any reason to think about Roth conversions while employed (and in the highest tax bracket) and 2-how should I plan for the interim period between 55 and 59.5 and/or age 75 (RMDs) in terms of drawing from taxable vs. Roth contributions?
I'm pretty far from the point where I have enough certainty to start modeling things, but could use some high level, big picture perspective.
Tax Filing Status: Married Filing Jointly
Tax Rate: 37% Federal, 5% State. Total income ~$800k (~$500k me, $300k wife), $20k dividends
Age: Him 46, Her 44
Total portfolio size ~$2.2 million
Taxable ~$1 million allocated in 100% equities
His 401k ~$500k, contribute at annual federal limit to traditional 401k. 5% company match. 10% post-tax non-Roth contributions for mega backdoor roth conversion, rolled into Roth 401k in-plan quarterly, current Roth 401k balance is ~$75k of the $500k total.
His Roth IRA ~$150k, 100% bonds, annual backdoor Roth contributions at max limit
His HSA ~$35k
Her 401k ~$500k, contribute at annual federal limit to traditional 401k, 5% company match.
Her Roth IRA ~$50k, 100% bonds, annual backdoor Roth contributions at max limit
Her HSA ~$35k
Edited to add key additional information. I have a pension that will pay about $75k a year at age 65 and social security for both of us at age 70 would add another $80k based on current projections
I'm pretty far from the point where I have enough certainty to start modeling things, but could use some high level, big picture perspective.
Tax Filing Status: Married Filing Jointly
Tax Rate: 37% Federal, 5% State. Total income ~$800k (~$500k me, $300k wife), $20k dividends
Age: Him 46, Her 44
Total portfolio size ~$2.2 million
Taxable ~$1 million allocated in 100% equities
His 401k ~$500k, contribute at annual federal limit to traditional 401k. 5% company match. 10% post-tax non-Roth contributions for mega backdoor roth conversion, rolled into Roth 401k in-plan quarterly, current Roth 401k balance is ~$75k of the $500k total.
His Roth IRA ~$150k, 100% bonds, annual backdoor Roth contributions at max limit
His HSA ~$35k
Her 401k ~$500k, contribute at annual federal limit to traditional 401k, 5% company match.
Her Roth IRA ~$50k, 100% bonds, annual backdoor Roth contributions at max limit
Her HSA ~$35k
Edited to add key additional information. I have a pension that will pay about $75k a year at age 65 and social security for both of us at age 70 would add another $80k based on current projections
Statistics: Posted by mopman78 — Wed Jan 15, 2025 2:23 pm — Replies 3 — Views 245