Financing home purchase in retirement

[Anonymous]

Anonymous wrote:I've stopped maxing my 401K in my 40s for exactly this issue. My money is going elsewhere.

That said, you should get a mortgage, and you will have no trouble getting one with your asset position, on top of other retirement benefits.

OP here. What tax bracket are you in though? We are in the 37% bracket usually plus high state income tax. We have been for probably 15 years. We also plan to start Roth conversations filling the 24% tax bracket as soon as we retire. We plan to wait to 70 for SS.

I think about stopping the 401k contributions above match now. At least I would be paying that taxes now. But honestly I don’t think it moves the needle much given that the returns in our 401ks have been far exceeding any annual contributions.

[Anonymous]

Anonymous wrote:If you have that much money You Must have a financial advisor that can help with this.

If all the money is in a 401K why would you have an advisor?

[Anonymous]

Anonymous wrote:Way too much money in 401k taxes as ordinary income. Should have stopped contributing past the match long ago.
Getting a mortgage is not a problem. Someone will give it to you.
You need to be your own advisor and figure out how to start lowering taxes on it all.

Our is just as big and we never, not even one year, contributed above the match. DH didn't even do the catch ups once qualified.

[Anonymous]

Anonymous wrote:

Way too much money in 401k taxes as ordinary income. Should have stopped contributing past the match long ago.
Getting a mortgage is not a problem. Someone will give it to you.
You need to be your own advisor and figure out how to start lowering taxes on it all.

Put it into an IRA and start converting it to a back door Roth.

The pro-rata rule makes a backdoor Roth a bad idea for many people at this income level.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Way too much money in 401k taxes as ordinary income. Should have stopped contributing past the match long ago.
Getting a mortgage is not a problem. Someone will give it to you.
You need to be your own advisor and figure out how to start lowering taxes on it all.

Put it into an IRA and start converting it to a back door Roth.

The pro-rata rule makes a backdoor Roth a bad idea for many people at this income level.

what is the pro rata rule?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Way too much money in 401k taxes as ordinary income. Should have stopped contributing past the match long ago.
Getting a mortgage is not a problem. Someone will give it to you.
You need to be your own advisor and figure out how to start lowering taxes on it all.

Put it into an IRA and start converting it to a back door Roth.

The pro-rata rule makes a backdoor Roth a bad idea for many people at this income level.

?? What do you mean?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Way too much money in 401k taxes as ordinary income. Should have stopped contributing past the match long ago.
Getting a mortgage is not a problem. Someone will give it to you.
You need to be your own advisor and figure out how to start lowering taxes on it all.

Put it into an IRA and start converting it to a back door Roth.

The pro-rata rule makes a backdoor Roth a bad idea for many people at this income level.

I just read up on the pro rata rule. It talks about it having an IRA that is a mix of pretax and post tax contributions. Who has that? I thought IRAs were either Traditional (pre tax) or ROTH (post tax).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Way too much money in 401k taxes as ordinary income. Should have stopped contributing past the match long ago.
Getting a mortgage is not a problem. Someone will give it to you.
You need to be your own advisor and figure out how to start lowering taxes on it all.

Put it into an IRA and start converting it to a back door Roth.

The pro-rata rule makes a backdoor Roth a bad idea for many people at this income level.

I just read up on the pro rata rule. It talks about it having an IRA that is a mix of pretax and post tax contributions. Who has that? I thought IRAs were either Traditional (pre tax) or ROTH (post tax).

In the same IRA account? How is that even possible??

[Anonymous]

Anonymous wrote:

Anonymous wrote:I've stopped maxing my 401K in my 40s for exactly this issue. My money is going elsewhere.

That said, you should get a mortgage, and you will have no trouble getting one with your asset position, on top of other retirement benefits.

OP here. What tax bracket are you in though? We are in the 37% bracket usually plus high state income tax. We have been for probably 15 years. We also plan to start Roth conversations filling the 24% tax bracket as soon as we retire. We plan to wait to 70 for SS.

I think about stopping the 401k contributions above match now. At least I would be paying that taxes now. But honestly I don’t think it moves the needle much given that the returns in our 401ks have been far exceeding any annual contributions.

If you are in the 37% tax bracket, surely you can save a substantial amount between now and retirement. Plus, how is your home equity only $800k, when your income is close to that or higher?

[Anonymous]

Anonymous wrote:We are planning to retire in two years at 59. We should have a net worth of $7.5 million at that point. Over $6 million of that will be in our two 401ks.

We have about $800,000 of equity in our current home. I expect we will buy a new primary residence soon after we retire. I think it might be in the $1.5 to $2.0 million range.

I am starting to think through how we would fund that purchase. We have plenty in our 401k accounts, but I don't think we want to pull it out at once because of taxes. So we just get a mortgage? Can we get a loan against our 401k balances? I don’t want to use all our funds outside the 401ks for the house purchase.

If you have been in the 37% tax bracket for 15+ years, why is your non- 401k savings so small?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I've stopped maxing my 401K in my 40s for exactly this issue. My money is going elsewhere.

That said, you should get a mortgage, and you will have no trouble getting one with your asset position, on top of other retirement benefits.

OP here. What tax bracket are you in though? We are in the 37% bracket usually plus high state income tax. We have been for probably 15 years. We also plan to start Roth conversations filling the 24% tax bracket as soon as we retire. We plan to wait to 70 for SS.

I think about stopping the 401k contributions above match now. At least I would be paying that taxes now. But honestly I don’t think it moves the needle much given that the returns in our 401ks have been far exceeding any annual contributions.

I’m trying to get a picture of your retirement plans.
Net Worth $7,500,000
401ks $6,000,000
House Equity $800,000

That leaves $700,000 in non 401k investments.

Your current come puts you in the 37% tax bracket which means it is over $750k this year. You also say that you have been in this bracket for the last 15 years. Where does your money go? Your non-401k savings are small and you can only put so much in your 401ks. Are you supporting other family members? Do you make substantial donations? Do you travel? Your house equity is small compared to your income and you plan to have mortgage in retirement for a $1.5-$2m house.

Upon retirement, you plan on converting to ROTH at the 24% tax bracket level. This is about $400k, let’s say that is $275 post tax. I feel like you won’t have much left to convert to ROTH, once your expenses are covered. Or do you have another income source in retirement (that is not taxable).