The limits for the Roth are going up quite a bit, I believe in 2005 we will be able to deposit $5000 per person.
So next year I will have the opportunity to max out a 457 plan at $12,000, and a Roth at $10,000.
That is more than I will have available to invest so I have to figure out which plan is better and how to allocate the investment.
The way I am looking at this is after retirement, the 457 is better as long as it is part of income which is less than the amount subject to income tax. Roth is the way to go for anything above that.
So if I add up my projected defined benefit pension plus social security and any other taxable income, and compare that to the maximum amount of income I can make before paying taxes, it will give me an idea of how much 457 funds I would need per year.
To estimate how much income I would need from the Roth, I would take my retirement income goal less the maximum income I can have before paying taxes.
So if I compare these estimated amounts for the 457 and Roth, it should give me a rough idea of the proportion to allocate my investment in the two plans.
Does this make any sense? If so does it sound like the right way to estimate how I should allocate my investment?
So next year I will have the opportunity to max out a 457 plan at $12,000, and a Roth at $10,000.
That is more than I will have available to invest so I have to figure out which plan is better and how to allocate the investment.
The way I am looking at this is after retirement, the 457 is better as long as it is part of income which is less than the amount subject to income tax. Roth is the way to go for anything above that.
So if I add up my projected defined benefit pension plus social security and any other taxable income, and compare that to the maximum amount of income I can make before paying taxes, it will give me an idea of how much 457 funds I would need per year.
To estimate how much income I would need from the Roth, I would take my retirement income goal less the maximum income I can have before paying taxes.
So if I compare these estimated amounts for the 457 and Roth, it should give me a rough idea of the proportion to allocate my investment in the two plans.
Does this make any sense? If so does it sound like the right way to estimate how I should allocate my investment?