Reply to Should I max out my pre-tax retirement options?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]40yo gov worker married to a 45yo gov worker, with a combined hhi of $300k, 2 young kids. We're already maxing out our Roth retirement options ($20,500 for a 457 and 401k each in 2022). I have contributed zero dollars to my post tax accounts (which have a max limit of $6k/year). We don't need the money monthly so I won't miss the reduction from my paycheck, but is there any reason not to do this? The kids' 529s are also in good shape. Between our retirement accounts today, plus our pensions, I'm not worried about our retirement funds but still if I don't need the money today is it silly not to max out all of my retirement options? Or should I invest them into something more liquid?[/quote]

At your income you should have done pre-tax before Roth. I mean, your decision there was kind of idiotic.[/quote]
This. Roth here is glaring financial illiteracy. At your income, a traditional 401k is the ONLY way to contribute to a tax-deferred retirement vehicle (other than the HSA). Your retirement income will be far lower than your W-2 income during your wage earning years, so why lock in your tax rate at 24% now? As govvies you could have anywhere from 8 all the way up to 20-ish years between retiring and SS/RMDs to convert a boatload of pre-tax 401k/457 monies to Roth at a much lower tax rate.

Also the 2023 Roth IRA limit is $6500 now, but this doesn’t apply to you due to being over the income limits.  [b]Your only option is a back-door Roth.  Personally, I wouldn’t even bother and would rather toss any extra funds into VTI 100% in a taxable brokerage account and call it a day.[/b][/quote]

NP here:
Huh? Why?

Backdoor Roth is getting funded with the same post-tax dollars as a taxable brokerage. Why would you impose taxes on yourself at some point in the future (i.e., invest in brokerage account)? That makes zero sense. If you have excess funds to put in a taxable brokerage, the first $6.5K should go in a backdoor Roth IRA. You'd be stupid not to do that. You can withdraw Roth principal contributions at any time without penalties or taxes, if you need the money for something.

The Roth IRA is so much more flexible and powerful than a brokerage account. [/quote]

Well, a few things:

1. Taxable account can be accessed at any time for any purpose
2. Ability to do tax loss harvesting
3. If you earn less than $80k in retirement, there are no capital gains taxes[/quote]

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