Is Roth IRA worth it at 55 with high income?

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  • #94436 Reply

      Is it still worth investing in a Roth IRA (versus my 403b) if you are, say, 55, with an income of $125,000? I’m in the highest tax bracket I’m likely to ever be in, so I’m hesitating about taking the tax hit. On the other hand, I do like the idea of diversifying, especially since tax rates overall may well go up in future years. Would love to hear what people think.

      #94437 Reply

        Not enough info about your financial picture and future tax situation to provide accurate advice. Run the numbers and see what the more optimal approach is.

        #94438 Reply

          Do both if possible. Tax diversification, and however the future turns out you won’t be totally wrong.

          #94439 Reply

            I would double check your tax assumptions. If you are single, that income puts you right at the top of the 22%, maybe bottom of the 24% depending on deductions. The 22% starts at 47k, in it’s scheduled to go up to 25%.

            If you retire soon, you’ll have a few years in a lower bracket , but as soon as SS kicks in, you could potentially be in a higher bracket.

            Recommended: Recharacterize Roth IRA contribution to backdoor Roth?

            #94440 Reply

              I think maybe Wrong question – where do you expect to drawdown from? And how?

              Then the Roth (I would do it either way)

              For example if I am 55 with $2M+ in 401k, by the time I would start to drawdown I would potentially have to draw down enough in the highest tax bracket to avoid RMDs

              Therefore paying tax now so I can withdraw in 70s tax free from Roth might be better… also I could flip the Roth to bonds and draw down the interest income tax free

              I would continue to Roth because it gives you future flexibility to withdraw tax free or just pull your contributions out.

              The Roth gives you the most flexibility – always can pull contributions and growth is tax free – if you don’t need the money I would. Also kicking off the 5 year timer on Roth is always valuable.

              #94441 Reply

                The only way to gain from investing on tax deferred basis here is to take the tax savings and invest in the Roth or elsewhere (Roth is still better most of time if one qualifies). Otherwise, you are just increasing current consumption (not necessary bad, just not aligned with goal of wealth building).

                #94442 Reply

                  Another vote for your drawdown plan will help you decide. You are approaching this from a right now point in time viewpoint. That is a big part of the decision. But so is future you and your plans for decumulation.

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