[BuyckCabin]

Looking for a sounding board.

I’m 50. planning on retiring at 57.

I’ve been maxing my 401K this year, and whatever the max will be next year, etc. I am debating maxing the Roth 401 instead. But that means I know I’ll pay 22% tax on that money (Federal). I live in FL so no state.

I was planning on converting $100,000 a year after I retire. BUT, I’ll be living in MN. Thus paying 12% federal and 7.85% in MN. Thus paying 19.85% total. At face value, the later looks slightly better. But I get an employer match would nullify the 2027 taxes I pay if I do the ROTH 401. I wonder if doing it 7 years earlier would be beneficial.

The wife will stay working after I retire. So we will have a minimum of 80k taxable income when I’m retired.

[jimhoward]

For most people the Roth is the better way to go. A dirty little secret is that for many people, the tax rate in retirement is, to their surprise, the same or even higher than it was when they were working.....negating the tax advantage of the 401K. The reason for that is income from retirement jobs, social security, and interest and dividends from after tax accounts, and 401K distributions all count.

But in your case, it does not appear to be true. Your tax rate in retirement looks like it will be low. As a result, it probably doesn't matter very much whether you contribute to a Traditional or Roth IRA. Roth is probably still better, but the difference is probably not huge. Of course, you will work out the number better than anyone on this board can.

[ltcdfancher]

Originally Posted by BuyckCabin

Looking for a sounding board.

I’m 50. planning on retiring at 57. Wife and I currently make 200,000+ a year (160,000 a year with no OT).

I’ve been maxing my 401K to the tune of $32,500 this year, and whatever the max will be next year, etc. I am debating maxing the Roth 401 instead. But that means I know I’ll pay 22% tax on that money (Federal). I live in FL so no state.

I was planning on converting $100,000 a year after I retire. BUT, I’ll be living in MN. Thus paying 12% federal and 7.85% in MN. Thus paying 19.85% total. At face value, the later looks slightly better. But I get an employer match of $6000-$6500 which would nullify the 2027 taxes I pay if I do the ROTH 401. I wonder if doing it 7 years earlier would be beneficial.

The wife will stay working after I retire. So we will have a minimum of 80k taxable income when I’m retired.

I’m a bit confused here. Once the author retires in a few years, the wife will continue to work adding $80K to the income side of the ledger. Add in the $100K of a Roth Conversion to the income side pushes this couple deep into the 22% bracket, doesn’t it?
Can this couple live on the single, $80K salary?
If not, then from where will they pull the rest of the money? Will the Rule of 55 apply?
How large is the 401K “elephant”?

I’m no expert, but I do spend time what-iffing various scenarios in my own plan. I’m spending down my tax-deferred assets now in order to deplete them entirely before turning on my SS income stream.

[Altavia]

Adding the need to also look at the IRMA brackets at your future income levels.

A 50/50 split could be a good target to balance.

[BuyckCabin]

Originally Posted by ltcdfancher

Can this couple live on the single, $80K salary?

No offense, but that question constantly confuses and amuses me. For the life of me I cannot fathom needing and spending 7,000/month or more.

We currently live in a new house (4 bed 2 bath) on a "lake" built in 2024 That has a $1500/month mortgage (will be paid off ion 6 years). Two teenagers in the house who eat everything that isn't bolted down. Taxes with bonds and HOA (AKA maintenance fees ) are crazy high here. That whole package (entire house operating cost including groceries and supplies) only costs us 4200/month today and that includes buying meat. I have only hunted and acquired 200# of meat thus far this year.

We have 0.0 interest in travel, or fancy cars, or big houses. I've already traveled the world and shot every critter I wanted. I already own all the boats and ATVs and equipment I'll need except for maybe the 30hp tractor I'll buy.

We are going back to a simple basic satisfying life. No people other than family. No clubs. No night life. Just us and nature and family and good wholesome down to earth living.