Anonymous
Post 07/21/2025 10:25     Subject: Roth 401k in 35% Tax Bracket
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.
Anonymous
Post 07/20/2025 17:12     Subject: Roth 401k in 35% Tax Bracket
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
Post 07/20/2025 13:35     Subject: Re:Roth 401k in 35% Tax Bracket
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
Post 07/20/2025 11:52     Subject: Re:Roth 401k in 35% Tax Bracket
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.


I did as much as I could by selling nonretirement mutual funds with relatively low capital gains to pay for the taxes due owing to the conversion. I first converted the entirety of an old IRA to a Roth IRA so I could do backdoor Roth IRAs in later years and then converted some of my 401k to a 401k Roth. I did make a mistake by overestimating the taxes and ended up with a $40,000 refund that took the IRS two years to pay (Covid backup).

If I were to do it again, I would have consulted a tax CPA to get the tax estimate right as I could have converted even more. Alas, I have no more non-retirement investments and can't think of other tax-efficent ways of doing it. Perhaps worth consulting someone about?

I put all of my 401k contribution into the Roth option. I don't look at my accounts often, but I would say I have about $6 million in my 401k and about $1.5 million in 401k Roth and IRA Roth.
Anonymous
Post 07/20/2025 10:22     Subject: Roth 401k in 35% Tax Bracket
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:We are a two fed family and we switched our TSP/401K to Roth a few years ago based on the idea that taes will likely go up at some point (a gamble of course) and our retirement income will be pretty high. The Roth does not have RMD so it will be the last $ we tap and hopefully pass to our heirs. Since we did non Roth for many years it is like hedging our bets.


Any reason you decided not to wait until you retire and before RMD kicks in? You know 10-15 year window when you are going to have lower income than now?


They are probably in the same boat as a lot of feds. From the moment they retire, they will likely be in the 24% tax bracket, so there will be no opportunity to do conversions at a better rate, like 12%.


This...I will be a 40 year fed at retirement (unless DOGE says otherwise). My tax rate will not drop too much.


But you could avoid state taxes if you move to a no-tax state. That's at least 5%.


Move to Florida etc. and start doing withdrawls when retired before SS or RMDs.
Anonymous
Post 07/20/2025 10:21     Subject: Roth 401k in 35% Tax Bracket
Next year you will be FORCED into Roth 401k for at least your 50 and over Catch up
Anonymous
Post 07/20/2025 09:10     Subject: Re:Roth 401k in 35% Tax Bracket
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.
Anonymous
Post 07/19/2025 15:12     Subject: Roth 401k in 35% Tax Bracket
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:We are a two fed family and we switched our TSP/401K to Roth a few years ago based on the idea that taes will likely go up at some point (a gamble of course) and our retirement income will be pretty high. The Roth does not have RMD so it will be the last $ we tap and hopefully pass to our heirs. Since we did non Roth for many years it is like hedging our bets.


Any reason you decided not to wait until you retire and before RMD kicks in? You know 10-15 year window when you are going to have lower income than now?


They are probably in the same boat as a lot of feds. From the moment they retire, they will likely be in the 24% tax bracket, so there will be no opportunity to do conversions at a better rate, like 12%.


This...I will be a 40 year fed at retirement (unless DOGE says otherwise). My tax rate will not drop too much.


Another fed here. My concern isn't going 24 to 12. My concern would be hitting 32 once TSP and spouse's 401k gets too big.


+1 I'll be doing some Roth conversions in the 24% bracket during retirement to avoid potentially getting bumped into a higher tax bracket and also avoid increase in Medicare.