It’s been a turbulent month since my last retirement post. Last month we were $4,020 ahead and this month we are $1,908 behind. All in all though, we are gaining.
We did hit a point where my work 401k dipped down to $98,000, but I’m glad to see that it is back up above $100k.
I did some cypherin’ with my work 401k on the calculator I mentioned last month. We wouldn’t be able to do it all at once, but with what we currently have in our traditional 401k we would pay a little under $20,000 in taxes if we were to roll it over into our Roth 401k.
Using a 12% return average, what we have in there today coupled with my 3% company match every year, that by law has to be pretax, that would grow to approximately $550,000 by the time I’m 62. That amount at our current tax rate would be around $122,000 that we would pay in taxes after the compound interest growth.
I don’t know about you, but I’d rather not pay an extra $100,000 in taxes. Unfortunately, I contacted our 401k provider and my company’s plan does not offer an option to convert your traditional investments into Roth.
I know that you should need less in retirement, but I don’t think Christy and I will fall into a different tax bracket than we are currently, with the expense of living on the east coast and inflation.
I don’t know what taxes will look like in retirement, but looking at the current brackets, it may be tough to fall into the 12% bracket.
I still have to look into it more to verify that we would be doing the right thing, but my thinking is to pull from our traditional investments first.
If we pay taxes at that time and use our Roth investments last, if there is anything left to leave to our children they “shouldn’t” have to pay taxes on it since we already did.
I’m hoping my thinking on that is correct. Who knows. Maybe if I am correct, that my not be the case in 40 years.
Investment | Deposit | Balance | Growth |
Work 401k | $1,213 | $102,148 | -$1,683 |
Roth IRAs | $1,000 | $19,927 | -$225 |