{ "media_type": "text", "post_content": "Noob question: how can I know my tax rate when i retire and start withdrawing money from 401k?", "post_id": "5b42072fd2d7cd00180b2fe4", "reply_count": 13, "vote_count": 2, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting" }

Noob question: how can I know my tax rate when i retire and start withdrawing money from 401k?

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Additionally, the question you should be asking is not what the marginal rates are when you retire, but rather how progressive will the rates be? The general consensus is that in the long term marginal rates will rise but taxes will probably become more progressive which is a net positive for those in retirement. Do not miss out on tax advantaged space in your accounts each year. Max a (traditional) 401k and your Roth IRA each year, your future self will thank you for that later.

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Do you know who will be president and what his or her policies will be in 10, 20 and 30 years from now? It's impossible to predict what your tax rate will be next year, let alone in retirement

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Great question. There are strategies to significantly lower your income at retirement even with a few million in the bank accruing interest.

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You really can’t. You can estimate given today’s rates but those change fairly frequently, so it’s really a guessing game thus far out.

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Also, you can't withdraw from your 401k without a penalty until you are 59 1/2 regardless of your age when you retire

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M2, thats not entirely correct. You can withdraw from your 401k without penalty for a variety of reasons, the most common method of accessing a 401k before retirement is to utilize a Roth ladder.

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OP, its based on the tax rate at the time you withdraw. You should definitely max and don’t fall for Roth contributions once your marginal rate is ~20% or so. Utilize a Roth ladder to avoid taxes until RMD.

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I was told my a financial advisor that IRA isn’t worth it when you make too much - can’t do traditional because can’t meet income requirement and Roth isn’t worth it

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Your financial advisor is shit. Look into backdoor Roth and mega backdoor Roth.

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it's based on my tax rate when I retire? I would assume that will be higher than my current tax rate? So what's the rationale for max it out?

Maths and SWAGs

Build a crystal ball

@C1 - you can do a backdoor Roth, which in a lot of cases is absolutely worth it. For non-deductible traditional IRAs, thats true. Still, I don’t trust most financial advisors because of blanket advice like that.

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