Reply to Anyone else dealing with this issue of "gap years" before retirement?

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[quote=Anonymous][quote=Anonymous]People worry too much about RMD’s, you have to pay the tax on the way in or on the way out. RMD’s start at 4% at age 75, which is a typical recommended withdrawal rate. At 80 they are still only 5%. Only once you get past 85 do the percentages start getting significant.

For example I’m in the 35% tax bracket, so there really isn’t incentive to pay the tax now with a Roth. The top bracket is 37%, so what’s the risk?[/quote]

I disagree unless you are very sure your tax rate will be materially lower when you are taking RMDs. RMDs can put you in the higher tax rate from the outset. Then you have to factor in one spouse dying, which will put the remaining spouse in the much higher tax rate for a single person. In addition, there is far more risk that tax rates will rise in the future than there is for them falling.

Roths are a bird in the hand as far as taxes are concerned. I recommend that everyone seriously consider putting all of their 401 contributions into Roth and do a backdoor Roth as well. The employer contribution will always be in the non-Roth 401k, so use that for your tax diversification strategy.[/quote]

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