Roth 401k in 35% Tax Bracket

[Anonymous]

Anonymous wrote:

Anonymous wrote:I did this but only because I intend to work to at least 70 and income would go up once RMDs kicked in.

Not OP but in a very similar financial situation. How did you calculate this? We have about 5M in various accounts and I'm over 50 so doing catch-ups. One financial advisor said do Roth for my catch up b/c taxes might go up after this administration given our national debt. Your point is also interesting. Our HHI from W2 is 500K to 700K bonus dependent. I want to stop working in 7 years.

There are several factors you want to look at, so it's not really just a calculation. Your marginal tax rates for conversions now is 35 or 37%, which is dreadful. There is a good YouTube video on Roth conversions that I saw the other day. Just search Bogleheads Conference Roth Conversion.

[Anonymous]

The people who so quickly dismiss this question and suggest doing Roth conversions once you stop working have pretty limited views of HNW, high earners' challenges. I am looking at a MASSSIVE tax burden once RMDs kick in and there's little room to do anything about it. Even if we retire as planned at 62 we're looking at a minimum of $100-150k in taxable income in the investment accounts. That leaves at most 10 years of pulling maybe $250k/yr out of pretax retirement accounts. Even with those withdrawals my RMD at 72 is likely going to be $500-700k to start. And it will increase from there going over $1m/yr for many years. All of those RMDs are going to be in max tax bracket. Based on that I, like OP, am considering diverting to Roth 401ks now to avoid what I predict will be even higher max tax rates by the time my RMDs kick in.

My point is this: not everyone's situations are the same. It is hubris to suggest the analysis is as simple as "you're only going to get $.65 on the dollar compounded.

[Anonymous]

Anonymous wrote:The people who so quickly dismiss this question and suggest doing Roth conversions once you stop working have pretty limited views of HNW, high earners' challenges. I am looking at a MASSSIVE tax burden once RMDs kick in and there's little room to do anything about it. Even if we retire as planned at 62 we're looking at a minimum of $100-150k in taxable income in the investment accounts. That leaves at most 10 years of pulling maybe $250k/yr out of pretax retirement accounts. Even with those withdrawals my RMD at 72 is likely going to be $500-700k to start. And it will increase from there going over $1m/yr for many years. All of those RMDs are going to be in max tax bracket. Based on that I, like OP, am considering diverting to Roth 401ks now to avoid what I predict will be even higher max tax rates by the time my RMDs kick in.

My point is this: not everyone's situations are the same. It is hubris to suggest the analysis is as simple as "you're only going to get $.65 on the dollar compounded.

This is really, really sad. I never thought about how hard it would be to get $700k-$1M/year from investments and then have to . . . pay taxes on this income like you're just some regular Joe who pays taxes on everything. I wonder if there's a foundation or tax pantry you could utilize to get you through these trying times? Absolutely horrifying how often the challenges of the superrich are ignored. Maybe Trump will save you.