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- Joined
- Jun 25, 2005
- Messages
- 10,252
OK, except for mathjak, who pays more income taxes in retirement than they did while they were working?
The reason I ask, is that "they" are writing and saying all the time that a Roth IRA is a great thing because you might end up in a higher tax bracket in retirement and your retirement plan contributions may be taxed at a higher rate than they could be now. I don't see how that can possibly be the case.
The way I see it, is that during the accumulation phase my Roth contributions are taxed at 25% or 28% or 33%, while my 401(k) contributions are not taxed.
In retirement, my Roth withdrawals are tax-free. My 401(k) withdrawals get taxed, but the first tax bracket is 0% ($16,400 in 2005 was tax-free) and right now some dividends are taxed at 15%.
A little TurboTax2005 run shows that if I have $20,000 in taxable IRA withdrawals and $20,000 in qualified dividends that my income tax is $1418 for a 55 year old married filing jointly for about a 3.5% tax rate.
With $20K dividends and $60K taxable IRA withdrawal, the income tax is $7524 or 9.4% rate.
Anyways, I just can't see where contributing to a Roth IRA makes sense for that tax-free withdrawal future.
So if you know of anyone paying more taxes in retirement than while working, can you please share with us some real examples?
The reason I ask, is that "they" are writing and saying all the time that a Roth IRA is a great thing because you might end up in a higher tax bracket in retirement and your retirement plan contributions may be taxed at a higher rate than they could be now. I don't see how that can possibly be the case.
The way I see it, is that during the accumulation phase my Roth contributions are taxed at 25% or 28% or 33%, while my 401(k) contributions are not taxed.
In retirement, my Roth withdrawals are tax-free. My 401(k) withdrawals get taxed, but the first tax bracket is 0% ($16,400 in 2005 was tax-free) and right now some dividends are taxed at 15%.
A little TurboTax2005 run shows that if I have $20,000 in taxable IRA withdrawals and $20,000 in qualified dividends that my income tax is $1418 for a 55 year old married filing jointly for about a 3.5% tax rate.
With $20K dividends and $60K taxable IRA withdrawal, the income tax is $7524 or 9.4% rate.
Anyways, I just can't see where contributing to a Roth IRA makes sense for that tax-free withdrawal future.
So if you know of anyone paying more taxes in retirement than while working, can you please share with us some real examples?