ROTH IRA Question

[bbqfan5909]

Should go match employers full match, then put into IRA.

I'm adding a Roth to our retirement plan at work, and wished I had done it 20 years ago... I would STRONGLY suggest looking at max the Roth, and put any employer match to the regular.

[boy wonder]

What i understand is that a number of employers now offer multiple options in their 401k:

1. Pretax (normal) $19,500 limit
2. Post tax - $58,000 limit
3. Roth - $19,500 limit

The "strategy" is to contribute more money into Post tax 401k which has a higher limit, then backdoor this amount into the Roth which has a lower limit. Add on the benefit that there is no income limitations for roth 401k like their is for IRAs (for those who make "too much" money!).

To the OPs question, there is no penalty for converting anything to Roth.

This is my strategy, but I can't come up with a way to be in a lower tax bracket .

[TeamAmerica]

This is my strategy, but I can't come up with a way to be in a lower tax bracket .

Roth, muni bonds, life insurance. You need sources of tax free income in retirement that are flexible.

I'm talking about your retirement tac bracket just for clarity. Make as much money now as you can bracket be darned.

[Huntingfool]

First of all listen to Shane - he does this for a living - remember this - the higher your tax bracket it means you are making more money! That is a GOOD thing

Converting to a Roth is the marketing push right now - listen to any financial planner radio show etc and it is the big push.

Here is the other side of converting to a Roth - Once you give a dollar to the IRS you will NEVER see that dollar again. IF you keep that dollar on a tax deferred basis then that dollar remains yours until you withdraw it - what is that dollar doing over all those years until you withdraw it??? Earning interest for you and not for the IRS.

The theory behind a Roth is that your tax bracket will be higher once you retire so go ahead an pay tax on it today and convert. Truth is that most folks will be in a LOWER tax bracket in retirement because they are not working any longer and not earning as much income. Yes the Democrats may raise taxes but as soon as a Republican is elected they will lower taxes. Guessing what future tax brackets may be is fools gold IMO.

So my approach over my 68 years of life has been to hold onto my dollar as long as I can so it is earning me interest rather than hand it to the government just in case taxes are higher when I need to use it - think about it

[HuntForHorns]

my goal in retirement is to have several source of income so i can manage my tax bracket within reason. i fully expect to have as much or more income in retirement but be in a lower bracket.

now who knows what the income tax rates will be when i retire. again can't predict that so just trying to have multiple sources of income.

This has always been my plan also. I don't need a lot of money to live on during the year so I will withdraw just enough from my taxable accounts to stay in the lowest bracket and then top it off with withdrawals from my ROTH account should I need extra. I plan to stay in the lowest tax brackets.

I understand that at some point minimum distributions will kick in but until that time that is my plan.

[HogHunter34]

Yeah it’s best to draw low % (2-4%) annually from tax deferred as your livable income day to day then when you need a lump supplement for major expenses take that out of your Roth so you avoid added tax impact