"Hi Help Me Retire,"
Hey there,
So, I’ve got a decent chunk of change in my 401k – a little over 800k to be exact. I’ve been maxing it out at 21%, throwing in almost all my catch-up contributions. But here’s the thing, I feel like I dropped the ball on a Roth IRA. I’ve only just started putting in 2%. I know I’ll have to do some serious converting, but I’m wondering if going all in for the next 10-11 years is really worth it. I’m currently sitting in the 22% bracket…
What do you think?
Catch you later,
Concerned Saver
Response from HELP ME RETIRE:
Hello There,
Although it may feel like you missed the boat on a Roth IRA, it’s never too late to start making contributions and exploring the benefits it offers. Given your current situation of having over 800k in your 401k and maxing out your contributions at 21%, including catch-up contributions, it shows you have a good grasp on your retirement savings.
Considering you are in the 22% tax bracket, opting for a Roth IRA can provide tax diversification in retirement. It’s commendable that you have started contributing 2% to your Roth IRA, but increasing that contribution to the maximum allowed amount can be advantageous in the long run. While it may require some conversions, maxing out your Roth IRA for 10-11 years could significantly enhance your retirement savings strategy.
The tax diversification that a Roth IRA provides can offer flexibility during retirement by allowing tax-free withdrawals. Additionally, having a mix of pre-tax and post-tax retirement savings can help manage tax implications in retirement. Given your current financial standing, dedicating resources to both your 401k and Roth IRA can create a well-rounded retirement portfolio.
It’s essential to consult with a financial advisor to create a personalized retirement plan that aligns with your goals and financial situation. A professional can provide guidance on the best strategies for maximizing your retirement savings while considering factors like tax brackets, contribution limits, and conversion processes.
Taking a proactive approach by optimizing your retirement savings through a combined strategy of 401k and Roth IRA contributions can lead to a more secure financial future. Evaluating the long-term benefits and potential growth of your investments can help you make informed decisions for your retirement planning.
Best of luck on your retirement savings journey!
Kind regards,
HELP ME RETIRE
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