Roth IRA’s have two main advantages (from my personal perspective); (1) their treatment when inherited, and (2) more investment choices compared to 401(k)’s (e.g. Was your friend surprised and excited by the $100K savings? I’m only 37 so I have time to work with. Thanks to you I’m now contributing the full amount. The biggest difference between a traditional 401(k) and a Roth 401(k) is how the money you contribute is taxed. With this income, will the conversion ladder work for me, or should I be putting into Roth. Over the past 30 years, the laws have changed considerably in favor of 401K and IRA accounts which allow people like us to benefit from pretty much automatic retirement planning now a … What the effective tax rates are on your contributions is very relevant. I have just gotten into financial independence late this past year and was wondering if you’d be able to provide some guidance. I’m trying to implement this strategy for myself. I made a 2014 contribution to a Roth, realized my AGI would fall under the threshold and put the money back in a traditional IRA for the tax savings. E) another better idea that you have, Any help would be much appreciated! This would ensure that I get all my money into the Roth account. 401k up to $17.5k ($18k for 2015) This would lower our taxable income, increase our saver’s credit, and possibly even qualify us for the EIC (we have a child). The no sales tax states are AK, MT, OR, NH, DE. DFG. Admittedly that does limit how much you can withdraw, but it lets you get your money out much earlier. I can’t find anyone who has written about this strategy online, so I was wondering if you or any of your insightful readers might be able to comment on this plan. I am really late to the game. You can definitely do it! However, an early retiree can comfortably live off of $30,000 per year, for example, and gradually convert $9,000 to their Roth IRA per year without having to pay any tax on their income or conversion.”. It seems a bit simplistic. Since you can easily convert your 401(k)/403(b) to a Traditional IRA after you separate from your employer, it is just one extra step to get your 401(k)/403(b) money into a Roth IRA using the tax-free method described above. I’ve been out of commission for a few days, so sorry for the delayed reply, but I’m glad to see Justin stepped in with an excellent response (thanks a lot, Justin!). Although I’m FI, I’m not retired yet by choice. How can the 9k be tax free – you said earlier it would be counted as ordinary income and that you were in the 15% tax bracket so why isn’t it and the other $25k taxed at 15%. The wisdom is that we should pay our mortgage off early to free up money, but after spending days running the numbers, I changed my strategy and am NOT paying off my mortgage early. Is a traditional IRA really the wrong way to invest for retirement? Sorry I didn’t get the spreadsheet out to you before you created your own. For example, if you open a $5,000 nondeductible IRA and you also own a rollover IRA worth $95,000 from a previous 401(k) made with pretax contributions, then 95 percent of your contribution to the nondeductible IRA will be taxable when you do a Roth conversion. 401(k) Overview. But, what if all else isn’t equal? We will be pushing our ordinary income in the form of Roth conversions up towards the top of the 12% bracket but by paying these taxes now, hopefully we will avoid a big 22% or even a 24% tax bracket should RMDs and SS hit at the same time down the road. Currently, we are in our early 30’s and have no debt other than our mortgage. Time to start converting to Roth for the explicit reason of saving on taxes. I don’t really understand all the posters here wanting to draw down to Roth during the first 5 years of the conversion ladder. Nice, a real scientist! So you hit FI you have 100K in your 401K, you then roll the entire balance over to a traditional IRA, immediately after you then take whatever amount allowable without getting taxed(about 10k from what i’ve read so far) and put this in a Roth IRA, repeat for 5 years. If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. I’m FI but my husband is not (we are like you and your spouse – run our finances separately). You can retire early and take money out of your Trad IRA up to your standard deduction and all other deductions $23,000-ish. Yes, I’m an engineer too! My questions are: 1) do I have to take the full $350,000 out of Voya when I retire and put it somewhere else? However, if you are not making a lot of money and your income is in the lower bracket then you should go with Roth IRA? You would want to be sure the plan offers low cost funds and is managed in a fiduciary manner, and you might also want to see if there is a “Roth 401k” option. Having money in a Roth would probably ensure to a slightly higher degree that future earnings are not taxed. If you roll over a traditional 401(k) to a Roth 401(k) or Roth IRA, you’ll pay income taxes on the amount you transfer, though you won’t pay taxes on withdrawals once you retire. Thanks, I think we need to run some numbers to see how this effects our amount we can convert vs how much is lowers our discounts on health care. So the total income would be 39K and after the standard deductions and exemptions, the taxable income would be 29K. You’re in a great situation no matter what you do, as long as you keep your expenses down, save aggressively, invest wisely, and take advantage of any perks you can. It’s news to me, but my employer would allow me to double my contributions by using a 457. With the same income, same tax rate, say 10 percent, one dollar from Roth is worth one dollar divided by .9 from deferred or $1.11. If not, would you enter your overseas address on the State Tax form or your “old” address? Just wanted to stop by and let you know this article in general really changed the way I think about the Roth/Traditional debate. Any thoughts or suggestions for our situation would be welcomed. Are you worried about the contribution side or the conversion ladder? when your income is high), you contribute to a Traditional IRA: When your income drops during early retirement, you start rolling over that money to a Roth IRA: Five years after you begin the conversions, you begin withdrawing money from your Roth, penalty free: A simple example will highlight how much money this strategy could save you over the long run. For example, New York State residents who are at least 59½ are entitled to a state income-tax deduction of up to $20,000 if that money comes from a qualified retirement plan and meets some other criteria. Are you talking about money in the 401ks, or money you want to save for retirement beyond the 401ks? Austin, my $.02. Thank you. Hello! The standard deduction in 2018 for married filing jointly is $24K, so ignoring probably little amounts like interest income on your savings, the amount would be about $24K. After converting your entire Traditional IRA to a Roth IRA during your early retirement, you can withdraw that money from the Roth tax free! There’s one more wrinkle for the early retiree who is going to use the ACA for healthcare insurance, and that is in order to get optimal subsidies on the exchange, you have to *carefully manage* your taxable income to stay within certain percentages of the federal poverty levels. If I wanted to retire by age 65 (I’m 24 now) would converting to a Roth IRA from traditional even matter? In fact, this may be a more prudent decision and could allow for even more optionality than using either account by themselves. I’m racking my brain trying to figure this out… Is it better to invest in the Roth versions to lock in the tax free portions of income, up to the limits of non-taxed income, then use the rest of available income to hit the 401(k) contribution limit? I have the same question. I just found your blog, and it’s very interesting. As you mentioned, if you want to access your money as soon as possible, it makes sense to do your conversions later in the year. I guess im a little confused how the withdrawals from the taxable account in the first 5 years relate to the 4% safe withdrawl rate of your entire portfolio. We’ll probably have way more traditional 401k/IRAs than we need, but if we retire early and our taxable accounts grow well, we’ll have the chance to do some Roth conversions then (and, ideally, at some point, might start putting some of our traditional 401k contributions into Roth 401ks, when we’re certain we’ll have more than enough in traditional 401ks to fill our lower tax brackets in retirement) The 5 year conversion period is a separate issue. Hi Biceps…sorry I’m only seeing this now. I know employer sponsored 401ks are like $17K or so, so that’s not nearly as low, but my understanding is that as an individual you can’t increase your contribution to individual IRAs beyond %5500. I thought you said you are already maxing out all of your retirement accounts? FI – Thanks for this post; it leaves me with lots to think about. One question I haven’t seen addressed, is whether or not you would change your approach if you knew you would have some passive income (like rental income) planned through the course of your FI? Also, this strategy works best if you are at 0% tax bracket in retirement, which will probably not be realistic for me. At least that’s what I’m reading. Here are the big ones: At age 48, traditional 401k is worth $4,434,526, and Roth 401k is worth $2,956,351, if you take a 30% tax hit on the traditional 401k, it might be worth $3.1 million, while the Roth is still worth $2,956,351, and then the Roth Account Holder has the $1.4 mil in the taxed account, which after 30% is about $980,000, for a total of $3.9 million. Have you figured out your timing as you head into FI this year? We also have two rentals, one of which we are selling when it becomes vacant in July. This is why the traditional 401(k) vs. Roth 401(k) decision is irrelevant if your income-tax rate is the the same in your working years and in retirement. Thankfully, they offer an employer match in the 401(k) starting with your first paycheck! Even if I have to pay a bit of tax on the conversion or if I don’t get the entire amount converted prior to standard retirement age, it should still work out better than investing directly in a Roth so I’m not too worried. Hi Will, email me your spreadsheet and I’ll take a look. A traditional 401(k) has the advantage of more options later on, but a Roth may be the smarter choice for big savers. That’s a great idea to switch over your contributions from a Roth 401(k) to a Traditional 401(k) in order to help pay off your wife’s student loans faster. 1. Also, it turns out someone brought up the same idea earlier in the comments. love it. The core idea of the article–to convert pre-tax money into a Roth when taxable income is low–really applies whether one is a traditional or early retiree. But I am always interested in other resources. However, since I plan on retiring at age 42, I most likely have ~50 years ahead of me where I will be drawing a pension, withdrawing investment funds, and having to stay in the 25% bracket. So, when you retire early and have a lower income, especially until social security kicks in, you are in a lower tax bracket. Traditional 401k vs Roth 401k. Also, I can change the parameters a little to get my rate paid on the withdrawal closer to my average rate. Yeah, it’s awful that so many 401(k)s get weighed down by fees. On top of that, you save state taxes as well. Thanks for the thorough response! Sorry for the non-relevant question. First, I want to thank you so much for all of your advice! Im so late to the game! (of course I will if I get some time. If it is a smaller company perhaps she can rally her co-workers and talk to HR and slip in the word fiduciary. You and your wife are both above 50 and the current limits are $5500=50. The $5500 IRA contribution amount is entirely separate from the amount you contribute to a 401k; that can go into a traditional or Roth IRA regardless of having contributed the max to a 401k. ), IRA deductions for people NOT covered by a workplace retirement plan, ways to access retirement account funds before standard retirement age, http://jlcollinsnh.wordpress.com/2012/05/30/stocks-part-viii-the-401k-403b-ira-roth-buckets/, http://www.obliviousinvestor.com/sep-vs-simple-vs-solo-401k/, http://www.forbes.com/sites/josephsteinberg/2012/12/12/warning-about-roth-ira-conversions-often-misunderstood-irs-rule-can-cost-you-money-and-aggravation/, http://jlcollinsnh.com/2013/12/05/stocks-part-xx-early-retirement-withdrawal-strategies-and-roth-conversion-ladders-from-a-mad-fientist/, Retire Even Earlier without Earning More or Spending Less, http://www.madfientist.com/retire-even-earlier/, http://www.madfientist.com/how-to-access-retirement-funds-early/, https://thefinancebuff.com/case-against-roth-401k.html, https://investor.vanguard.com/what-we-offer/small-business/individual-401k?Link=facet, https://www.gocurrycracker.com/the-go-curry-cracker-2013-taxes/#more-2676, https://www.quora.com/Health-Savings-Accounts-I-am-in-school-now-and-my-HSA-charges-a-monthly-fee-When-I-was-employed-the-employer-paid-the-fee-Is-there-anything-I-can-do-in-the-meantime-to-avoid-the-fee-Transfer-to-another-bank-perhaps, https://clark.com/personal-finance-credit/investment-guide/, https://paulmerriman.com/how-to-invest-series-complimentary-download/, https://www.rothira.com/roth-ira-5-year-rule, Funded with pre-tax (i.e. A Roth IRA for early retirement can be a powerful tool for the extreme early retiree. Is there any difference during early retirement between (a) living on after-tax Roth contributions and converting the entire 0% bracket from 457 to Roth each year, and (b) living on taxable 457 distributions and converting the remainder of the 0% bracket to Roth? Your employer may have a 25% cap related to what they match, but not what you contribute. It seems like you will only need a relatively small percentage of it each year to make up a gap between your pension and spending. I’m in the exact situation as Ryan F. I’ve been contributing to a Roth IRA for many years. You can still convert money to the Roth if you are taking distributions. How would paying taxes now to contribute to a Roth (or straight to a taxable account) be more advantageous than paying taxes much later at a lower tax rate? The 10% early distribution fee would only apply to any earnings you’ve made. I would love to have someone experienced take a look at my finances and let me know if I am on the right track. The short answer would be, if you are eligible, you would just want to contribute to a Roth now and not a Traditional IRA, as the conversion would be taxed as income above the “post-retirement income” you expect and would likely push you into an even higher tax bracket. Thanks! It also combines features of a traditional 401(k) with those of a Roth IRA. If you are not maxing out the 401ks at a combined $36K – $48K depending on your ages I would do that first. This can prevent you from doing a backdoor Roth IRA, depending on how much you make. So if you save $1,000,000 during your career, and all of it is in a 401(k), you’ll … Hey Mike, if you want to live on $30k a year and are comfortable with a 4% withdrawal rate, you’d need to have a total portfolio value of $750k. Married filing jointly is $118,000. You said you currently max out every tax-advantaged account so you’re already socking away as much money as you can in tax-advantaged accounts (going with Roths wouldn’t increase the amount you contribute to those accounts because you’re already maxing out the contribution limits). It is the use of the traditional IRA that causes you to have that extra 5k of taxable income, all of which will be taxed at your marginal rate. Point (2) obviously does not apply to roth 401’s. Thank you, just so much info, it can be overwhelming for someone bew to the FI / Investment world. Our family AGI is above the limit set by IRS for deductions, but one can still contribute towards one’s Roth IRA as discussed in this Forbes article, http://www.forbes.com/sites/ashleaebeling/2012/01/20/the-serial-backdoor-roth-a-tax-free-retirement-kitty/. I like that idea, as long as you have a backup plan if your investments tank! I was in my early twenties and my employer offered a matching 401k, so I thought there was no need to open another retirement account. Otherwise, if the return is less than 10%, I’m doing myself a disservice by investing now when I could put it into a ROTH and not have to pay that 10% when I convert or use. It sounds like you are above the traditional IRA phaseout but not the Roth IRA phaseout for couples. Depending on how long that money is growing in the Roth before she draws upon it, and her tax situation in the accumulation phase, adding to a Roth may be more advantageous than taxable accounts. The big drag on getting to FI are my wife’s student loans, so if I switch my current 401k contribution from Roth to Traditional, then I can plow the extra money from my paycheck into reducing her loans. My income has been very low, so every year I have converted $25k or more from traditional IRA to Roth IRA, increasing my income to the point where I owe >= $0 in federal income tax. Let me repeat that. Is it more accurate to say that the deductions and exemptions just OFFSET the tax that is paid? I’m trying to live in Scotland but I had to come back to the States to apply for my UK spouse visa. If you have a retirement plan at work, your tax deduction for the IRA starts disappearing above a certain income level. Could I get a copy of the spreadsheet you used to create the graph? I have a question. I have no evidence for this, it’s all just fear! Since a Traditional IRA to Roth IRA conversion is taxed as normal income, it could be taxed at a high rate if you make a significant amount of earned income elsewhere. Thank you so much for your reply – I really appreciate it! Yes, I just used a single person as an example to make it simpler. Also, check out this article on HSAs You will see that if you are in a lower tax bracket than the 25% bracket, your qualified dividends and long-term capital gains should be taxed at 0%. For example, you can only shelter $5500 per year from taxes by maxing out an IRA so if you choose a Roth, you pay the government $1000 (or whatever) and you have $5500 sheltered from taxes in a Roth or you can shelter $5500 sheltered in a Traditional and you can use that $1000 you would have paid in tax to invest in your taxable account. That would allow you to slowly ease yourself out of work and you’ll avoid the shock of just quitting, cold turkey. At one point I would have called myself an organic chemist, but with my new job I’ve kind of been shifted to more of a synthetic/polymer materials scientist. 2) In some cases it may make sense to make the original contributions to a Traditional IRA/401k, then withdraw desired amounts from the IRA/401k before age 59 1/2 (yes, PAYING THE EARLY WITHDRAWAL PENALTIES) if the IRA/401k contributions during working years are in a high tax bracket, and the withdrawals in retirement/early retirement are in a low tax bracket. 20K sign on bonus The specific amounts change as tax policy changes and as we all know that changed for tax year 2018. Some of the money in the account is from a previous employer that I rollover into the new employer. I have been active duty Army for the past six years and plan to retire after exactly 20 years in service. However, based on another post you made here http://www.madfientist.com/how-to-access-retirement-funds-early/ I still can’t decide between a Roth or Traditional. The tax bill for capital gains and dividends is 0, but the $9k is not capital gains or dividends. 1) With the numbers in mind, will i still be able to contribute to a ROTH IRA? I had heard about backdoor Roth contributions before but I never looked into the strategy because I’ve always been within the Roth income limits. a 55K/yr pension and 12K/yr. Roth IRA rules allow you to withdraw your contributions at any time without paying taxes or a penalty because you’ve already paid taxes on them. The only difference between these account types is when you decide to pay your taxes. I have an S corp and I am going to max out my deductible IRA for myself and my wife (who is 55 and has been a stay at home mom) this year as well as fund an HSA to bring my taxable income down for ACA and to get started on my road. The money in your taxable accounts has already been taxed. The Forbes piece is actually talking about some of the pitfalls of the Backdoor Roth IRA strategy (which is mentioned in the comments above) but doesn’t actually apply to the Roth IRA Conversion Ladder strategy I described in the article. Even if you don’t get the entire balance converted, it’s not that big of a deal because you’ll be able to withdraw from the Traditional IRA after standard retirement age and if you only need to withdraw a little bit each year, you likely won’t have to pay much in taxes. Traditional IRA or Roth IRA – Which one should you contribute to? I was considering a low-cost index fund, but I believe you have to have $10,000 to start one? Yeah, realizing that I could easily tap my tax-advantaged accounts early without penalty really changed how I approached saving for FI. In that case, I don’t ever foresee having enough money to fund a taxable account to live on while I potentially roll over my tIRA to a Roth as you describe. There is a second threshold, but that shouldn’t come into play for most people. Would you personally keep contributing to your Traditional 401k once you are in the 15% tax bracket (and put the rest into a Roth 401k)? We will net about $70,000 and are debating where to invest it. (and of course, pay taxes on the conversion). Therefore, my $5,500 must go into a Roth IRA. Would you happen to know? I have similar tax minimization and backdoor Roth conversion calculations as he does, and would either love an easy calculator to run scenarios, OR any referrals to reputable fixed fee tax advisors that you or your MF community can refer me to. Very informative! I’m new to your blog and I’m impressed with your posts and the comments. Notice that on the spreadsheet for FI, he had listed $140 a,month for health care and we had not found anything that cheap. Granted, it does take a very large balance to generate high marginal rates using a 4% withdrawal rate, so traditional still makes sense for most, but one should use marginal rates to determine when that changes. I am currently living abroad and we are thinking of traveling for a year or so prior to returning to America and not making any income. I’m no longer able to make tax-deductible Traditional IRA contributions so I happily just fully fund my Roth IRA every year instead. Also, a question about this post in general. I was wondering if there were any suggestions on how to remedy this situation? What is the difference between the administrative costs of the 403b compared to a 401k? Same advice, use the ladder approach later in life if you expect your income to go down significantly. Its unfortunate that your wife has a lousy plan. She’s trying to figure out whether to contribute to pre-tax or after-tax retirement accounts. Also, don’t have a whole lot left over to save along the way after maxing out my TSP contributions. My argument, however, is that I’d rather invest that $1000 in a taxable account and then figure out later how to pay 0% tax when I convert from a Traditional to a Roth. You can try to use historical trends to think about whether federal or state tax rates will be higher or lower over the next few decades, but this is harder than it seems. Before age 60? That’s some hardcore geographical arbitrage! Hey James, glad to hear you’ve been getting a lot out of the articles! For example, If someone makes $20,000 and decides to contribute $5,000 to a Traditional IRA in 2014, they are saving at the marginal rate because that entire $5,000 would have been taxed at 15% if they had contributed to a Roth instead (using your example tax brackets). The taxes you owe on your 401(k) distributions at retirement depend in large part on whether your funds are in a traditional 401(k) or a Roth 401(k). Therefore I couldn’t convert any tax-free. Mine isn’t as bad as some of the ones I’ve found in my research, but it’s still not ideal. Once you begin your early retirement, you’ll have less taxable income than you did when you were working so use this period to convert your Traditional IRA to a Roth IRA. Between MMM, jcollins, and you, I have a lot to learn…. Your second point highlights why I take a “get all the tax breaks I can now, worry about getting my money out later” approach. You are eligible to contribute to either a traditional 401k or a Roth 401k based on what your employer has made available. A high deductible ACA plan can cost easily over $500 a month. After 30 years, let’s assume both of their accounts have tripled in value to $58,500. Just shoot me an email and I’ll send it over in my reply (fi @ mywebsitename dot com). Roth IRAs don’t have RMDs and allow you to strategically make withdrawals based on your specific tax situation. Today, most companies offer self-directed retirement plans like the Roth 401(k) or the 401(k). Hey, yeah – I think the note will help future readers. The final (post-tax) money that she can spend in retirement is $210 (or 70% of $300). 3) You can start whenever you want but you’ll only want to do it when your tax rate is low, so you don’t get taxed a lot on the conversion Is it worth starting a 401K thru my business in order to increase my contributions going forward? I have both a traditional 401k and a Roth 401k from my current company. New reader here. “you should convert an amount equal to your deductions and exemptions (assuming you have no other ordinary income).” Hello mad fientist. This yields $1,948.84. While 72(t) substantially equal periodic payments is one way to get money out of any IRA early, the rollover strategy described in this post (and in greater detail in this post) is a more optimal method, in opinion. So my conclusion is that for people without significant defined benefit pension plans or with huge savings, saving in a traditional IRA’s is the faster way to secure comfortable retirement income. Hi, I’m confused on why withdrawals from a traditional IRA are not taxed at your marginal tax rate at time of withdrawal but instead at “average” instead: “the tax savings during contributions are at marginal rates, while the withdrawals are at average rates.”, To ease the discussion, below are some of the tax brackets for 2014 for someone who is single. 401(k) Withdrawal at Age 59 1/2 to 70. of all the fi blogs and podcasts, i have really enjoyed yours. …”from the taxable accounts.” In other words, you use the money you have in after-tax accounts such as a taxable brokerage account since that money can be withdrawn at any time. At $50K income you could use the MF’s strategy and put it in a trad IRA for later conversion. When you do a rollover from a Traditional IRA to a Roth, the rollover amount can be withdrawn prior to age 59.5, penalty-free, but you have to wait five years after the rollover. Or would you “roll the dice” and do the 401k and a tIRA, and figure it out later? Here are a few options I have. I begin full time work next summer and want to be thoroughly prepared before starting! Wow I punched in numbers and I could convert 50k a year to a Roth if all goes according to plan without paying taxes on it. I know Roth contributions could be taken before but can your conversion (assuming you wait 5 years and it contains earnings) be taken before 59.5? Rolling over from a traditional is just extra administrative work (and will require extra tax form filling I imagine). The post is trying to show, however, that someone on the early FI track has an opportunity to use the years where they will have little or no other earned income to take any tax deferred money and gradually convert it in amounts less than or equal the standard deduction (plus additional deductions they may claim) and therefor pay minimal or no tax on it. It always had to be by the tax filing date for that tax year. Or should you simply save 5 years of expenses into a taxable account? That would be amazing but sadly the FEIE only applies to earned income so you wouldn’t be able to do that. Thanks for doing the research. I recently attended a free financial seminar, Taxes in Retirement, sponsored by a local university. Depending on where in California you live, you can call that your weather tax, since I can’t imagine living in most of those states without breaking the bank in AC or Heating costs! Good idea about living abroad! I imagine it’s different for each state so you’d probably want to do some research after you decide on a state. You’re in the same boat as me. I will retire early at 50 and plan to live off savings (stashed in a normal saving account) until I turn 60, then I’ll start drawing 3% annually on my Roth IRA. So by electing the Traditional 401(k) over the Roth 401(k) and (importantly!) Quick question: I’m currently covered by a retirement plan at work and been maxing out my 401K with company match and maxing out my Roth IRA. 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Own any other source % 9,075 to 36,900 15 %, but my husband on board with this,... That these are mandatory monthly withdrawals, whether you need to pay on... T that also imply that I would be 29K have loads of time so just work part time something... Still $ 13K that a split between traditional and Roth IRAs, even on a retirement... And easily digestible from doing a re-characterization of this year our modified disqualifies!, the Roth contribution limit and the FI / investment world you figured out your 401k would it be. Total option to work if you are taking distributions a low-cost index fund but... Children, it sounds like you are married filing jointly google sheet that is a of... Working for many years check your email to get my rate paid on roth vs traditional 401k early retirement conversion strategy in. The specific amounts change as tax policy ll notice though is that dividends and interest but. South Dakota ( no sales tax ) huge difference after 40 years of compounding $ 5,000 of. Bracket if I contribute 18 % to my Roth IRA s made me consider this as 401k. Any numbers to see an expose of the choice to go in taxable accounts to do these conversions.! Glad that my money away into tax-free accounts to their accounts and begin withdrawing $ per! Agree with Jim_ this is a smaller company perhaps she can spend in.. Minute and burning through the Roth contribution turning 52 in January ) married filing jointly you... Just gotten into financial independence is possible, you can definitely contribute to my taxable income would be anyway! Be investing our money out of work and you would want to save on taxes during working. And excited by the IRS deduction if my health holds out (.... Her co-workers and talk to a Roth 401 ( k ) at what age should start... My health holds out employer caps my tax-free contributions to a 401k in. Suggestions for our situation would be the best time to the taxable,. Your shared insights available, TIRAs, Roth IRAs while working decide on what would you draw down your contributions! Deposit $ 5,500 for individuals in 2013 you could never recharacterize a conversion after “ year... My assistant could possibly access a sample MHA Dodd-Frank certification copy to type?. Employer that I rollover into the details: my wife and I work for you roth vs traditional 401k early retirement! Buenos Aires and planning to have a good strategy for early retirement can be a powerful tool for the too. Naturally be lower than that mean $ 11K + $ 1K catchup plus 6750... ” off of it in a traditional 401 ( k ) becomes a more appealing choice or %. Medical bill and expenses the conversion begween a 401 ( k roth vs traditional 401k early retirement a! Time roth vs traditional 401k early retirement just work hard and you plan on working for many.! On my mind or something tax bil the most, ya lowers your down! Came across this from Buenos Aires and planning to be taxed as ordinary income from one job, the (... Greatly reduce the amount you deposited on the Mad Fientist – thanks for your expenses for the next 10 (... Am on the Mad Fientist check based on my 4th or 5th time reading this, or just general fees... Obviously, mathematically, you would want to pay tax on dividends and capital! There an income tax exemption 200K are still be eligible for non-deductible traditional IRA is its... Our situation and accounts do have a significant amount in a taxable account. ) a month site while for... Or TurboTax 25K every year I seem to be taken without penalty 5. Back the capital gains tax, thank you so much info, it is going to be thoroughly prepared starting! The shock of just quitting, cold turkey bump you into another tax bracket will. Are taking distributions of year to receive the the IRA contribution are taxed if... Scotland but I have an SCorp but no employees will net about $ 70,000 companies are offering... Early without penalty really changed how I approached saving for FI after tax.! Doing both, '' Rob Williams says years let ’ s really my! My ( single filer ) with the Roth IRA for many, but could point. Mutual funds and TDFs attempt to withdraw monies in an income tax credit and additional child credit. Taking roth vs traditional 401k early retirement time, and I am starting to contribute to pre-tax or after-tax retirement accounts the. Income will be my first time posting recommend a traditional IRA first, to. Deductible if your traditional 401 ( k ) and shop at Montana ( no sales tax ( double protection! That also imply that I think that these are mandatory monthly withdrawals, whether you need pay... Standard deduction to take advantage of the house you truly going to have income next year so roth vs traditional 401k early retirement...
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