Does it make sense to start at 4x25?

[welderwannabe]

many retirees , self included tend to have built a lifestyle around their higher years and retirement income is about that range

Watching my parents, now in their 70's, their tax rates were in fact higher in their early retirement. However, they are significantly lower now...22% to 24% marginal rate depending on the year.

In my case, im firmly in the 35% bracket right now working. Very unlikely I will be anywhere near that when I retire, absent some major tax law changes.

[welderwannabe]

For traditional IRA types ... it ends up all the same with having it there or in taxable. Both taxed at ordinary income rates.

Could be a different story for Roth IRA types.

Only true if your marginal tax rate is the same when you're working as when you retire. In most case it isn't, your tax rate at retirement is lower. Thats the real tax benefit of the IRA.

That all said, I keep lost of bonds in taxable. My theory is that our taxes are all likely to go up based on our deficits. Strap in for the ride.

But what is commonly left out in the many times it's been written or spoken the same as you -- that you benefit if your tax rates are lower in retirement -- that having to take taxable distributions can end up in having a higher amount of your Social Security being taxed and higher Medicare rates via IRMMA.

However, not the point I was making nor was I advocating to putting ones money in a traditional IRA/401k. I was responding to the often spoken fact that there is no difference in taxation between having the money in an IRA or not, you'll pay the same taxes later. It just isn't true for most people.

Me, I do all ROTH in my workplace 401k, for exactly the reasons you mention.

[welderwannabe]

That all said, I keep lost of bonds in taxable. My theory is that our taxes are all likely to go up based on our deficits. Strap in for the ride.

Are you thinking that you may have a harvestable capital loss with your bonds over time, as long rates stay high or go higher due to increased US Treasury issuance to fund the guv?

I have taken advantage of a lot of tax loss harvesting opportunities on my LTT's the last couple of years as there have been lots of losses unfortunately!

They also give me some state tax benefit until next year when NH stops taxing dividends. In other states with a full income tax, people would effectively pay state income tax on LTT dividend's when they withdraw the money from their IRA, so the benefit is lost.

I don't want to say I don't care about income tax on bonds. I do. But bogleheads focus way to much on taxes, and in many cases its pennies, and construct entire portfolios on saving a couple % in taxes. Even back when LTT's were paying 1.675%, bogleheads were all worried about keeping them in taxable. The tax on that interest then is negligible.

[yankees60]

For traditional IRA types ... it ends up all the same with having it there or in taxable. Both taxed at ordinary income rates.

Could be a different story for Roth IRA types.

Only true if your marginal tax rate is the same when you're working as when you retire. In most case it isn't, your tax rate at retirement is lower. Thats the real tax benefit of the IRA.

That all said, I keep lost of bonds in taxable. My theory is that our taxes are all likely to go up based on our deficits. Strap in for the ride.

But what is commonly left out in the many times it's been written or spoken the same as you -- that you benefit if your tax rates are lower in retirement -- that having to take taxable distributions can end up in having a higher amount of your Social Security being taxed and higher Medicare rates via IRMMA.

However, not the point I was making nor was I advocating to putting ones money in a traditional IRA/401k. I was responding to the often spoken fact that there is no difference in taxation between having the money in an IRA or not, you'll pay the same taxes later. It just isn't true for most people.

Me, I do all ROTH in my workplace 401k, for exactly the reasons you mention.

It was only once I got close to doing the Required Minimum Distributions (this year) did I realize the additional benefits of Roth investments.

I did the maximum Roth investments whenever possible as part of my no debt personality. I was going to be forever free of the future tax liability for these investments.