Current Tax Bracket vs. Retirement Tax Bracket

[Anonymous]

what is your current tax bracket and do you expect it to stay the same or go down/up during retirement?

[Anonymous]

36% effective tax rate. I expect it to go up, which is why we have transferred about $550k to a Roth IRA.

[Anonymous]

We're in the 25% federal bracket now. Expect it to be lower in retirement in a dozen years or so. ("retirement" being the age when I expect I will no longer be able to work)

[Anonymous]

Anonymous wrote:36% effective tax rate. I expect it to go up, which is why we have transferred about $550k to a Roth IRA.

Details plz. Isnt there a certain income level max?
also, I guess that means you paid taxes NOW on that money correct?

[Anonymous]

I think we can all expect our taxes to go up.

[Anonymous]

Anonymous wrote:We're in the 25% federal bracket now. Expect it to be lower in retirement in a dozen years or so. ("retirement" being the age when I expect I will no longer be able to work)

Do you have retirement money saved? If you do, even if you DON'T retire you are required to take you "minimum distribution" from IRA accounts. Unless its all in a Roth IRA - you are going to be taxed on those dollars. also your social security will be taxed...not all of it but some of it will be taxed. This income will also count towards determining your tax bracket

[Anonymous]

Anonymous wrote:

Anonymous wrote:36% effective tax rate. I expect it to go up, which is why we have transferred about $550k to a Roth IRA.

Details plz. Isnt there a certain income level max?
also, I guess that means you paid taxes NOW on that money correct?

There is effectively no income limit now. You deposit money into a regular IRA and convert it to a Roth instantly. This is not a loophole -- it's something Congress deliberately created a couple of years ago as a revenue raiser since, to your second point, it results in more taxes paid now (on the conversion). It's a huge revenue loser in the out years ,however, so it wouldn't shock me to see Congress claw it back at some point.

[Anonymous]

Anonymous wrote:I think we can all expect our taxes to go up.

OP here - that's what I'm afraid of which is why I asked the question. wanted to see if I was the only one who expects this to happen.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:36% effective tax rate. I expect it to go up, which is why we have transferred about $550k to a Roth IRA.

Details plz. Isnt there a certain income level max?
also, I guess that means you paid taxes NOW on that money correct?

There is effectively no income limit now. You deposit money into a regular IRA and convert it to a Roth instantly. This is not a loophole -- it's something Congress deliberately created a couple of years ago as a revenue raiser since, to your second point, it results in more taxes paid now (on the conversion). It's a huge revenue loser in the out years ,however, so it wouldn't shock me to see Congress claw it back at some point.

Is the conversion easy?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:36% effective tax rate. I expect it to go up, which is why we have transferred about $550k to a Roth IRA.

Details plz. Isnt there a certain income level max?
also, I guess that means you paid taxes NOW on that money correct?

There is effectively no income limit now. You deposit money into a regular IRA and convert it to a Roth instantly. This is not a loophole -- it's something Congress deliberately created a couple of years ago as a revenue raiser since, to your second point, it results in more taxes paid now (on the conversion). It's a huge revenue loser in the out years ,however, so it wouldn't shock me to see Congress claw it back at some point.

Is the conversion easy?

Yes. Google backdoor Roth IRA

[Anonymous]

Hey thanks PP.

[Anonymous]

Anonymous wrote:Hey thanks PP.

If you do it, do it soon. I can't imagine Congress will keep it in place for that long with all the focus on long-term budget stuff. It's really dumb budget policy.

[Anonymous]

I don't think taxes will go up enough to make up the difference between my tax bracket while working and my tax bracket in retirement (and if they did, that might signal things are bad enough that Congress would also impose a small tax on Roth IRA withdrawals). MMV

[Anonymous]

Anonymous wrote:I think we can all expect our taxes to go up.

Yup. It's not sustainable in the current form. Not even close. I'm hopeful it's done gradually.

[Anonymous]

Anonymous wrote:I don't think taxes will go up enough to make up the difference between my tax bracket while working and my tax bracket in retirement (and if they did, that might signal things are bad enough that Congress would also impose a small tax on Roth IRA withdrawals). MMV

That and if the alternative is putting money now in a pretax investment vehicle you also need to factor in whether tax will go up enough to wipe out additional gains on compound interest from the deferred tax payment. I really doubt they will.