Dear Bogleheads -
My question relates to contributing to an employer Roth 401k vs traditional 401k, if your traditional 401k is doing well with 15-20 years before retirement.
Our situation - wife and I are early 50s and make $300K/yr in W2 wages + 20K in dividends and MuniFund interest from taxable brokerage accounts worth ~1M. Retirement 401ks through our employers are worth ~6M and have accrued nicely per S&P500 and growth index funds. The 401ks allow pre-tax or Roth contributions by paycheck but not mega backdoor nor Roth contributions outside of paycheck deductions. We have Roth solo 401ks for sole proprietor business with ~40K in index funds and contribute $0-5K/yr for the employer fraction depending upon business and expenses.
We have maxed our backdoor Roth IRA contributions since 2020. Over 2020-2022, with market downturns and favorable tax rates, converted our traditional IRAs to Roth, now worth ~250K. Only other component is HSA worth ~40K in index funds.
No debt and kids are post-college and supporting themselves![:)]( "Smile")
. We like our jobs and may work to retirement age, but are in a position to consider retiring earlier. Our current tax bracket is 24% federal, 5% state. Future W2 salary, RMDs, and SS may not drop us into a lower bracket.
So, about 5% of overall portfolio is in Roth accounts .. are thinking that the lower tax rates for 2024-2025 may be a good time to increase that fraction for our retirement and estate thereafter.
I’ve seen postings suggesting that if current and future fed+state are <25%, go with Roth 401k. If >30%, go with pretax. We’re in that 25-30% grey zone, so thought to ask. If we consider Roth, we’d shift our paycheck contributions now through 2025 and see what happens to decide thereafter.
Thanks for your thoughts -
RR
My question relates to contributing to an employer Roth 401k vs traditional 401k, if your traditional 401k is doing well with 15-20 years before retirement.
Our situation - wife and I are early 50s and make $300K/yr in W2 wages + 20K in dividends and MuniFund interest from taxable brokerage accounts worth ~1M. Retirement 401ks through our employers are worth ~6M and have accrued nicely per S&P500 and growth index funds. The 401ks allow pre-tax or Roth contributions by paycheck but not mega backdoor nor Roth contributions outside of paycheck deductions. We have Roth solo 401ks for sole proprietor business with ~40K in index funds and contribute $0-5K/yr for the employer fraction depending upon business and expenses.
We have maxed our backdoor Roth IRA contributions since 2020. Over 2020-2022, with market downturns and favorable tax rates, converted our traditional IRAs to Roth, now worth ~250K. Only other component is HSA worth ~40K in index funds.
No debt and kids are post-college and supporting themselves
. We like our jobs and may work to retirement age, but are in a position to consider retiring earlier. Our current tax bracket is 24% federal, 5% state. Future W2 salary, RMDs, and SS may not drop us into a lower bracket.So, about 5% of overall portfolio is in Roth accounts .. are thinking that the lower tax rates for 2024-2025 may be a good time to increase that fraction for our retirement and estate thereafter.
I’ve seen postings suggesting that if current and future fed+state are <25%, go with Roth 401k. If >30%, go with pretax. We’re in that 25-30% grey zone, so thought to ask. If we consider Roth, we’d shift our paycheck contributions now through 2025 and see what happens to decide thereafter.
Thanks for your thoughts -
RR
Statistics: Posted by RogerRabbit — Tue Feb 06, 2024 6:17 pm — Replies 1 — Views 207