GoodbyeYellow
Recycles dryer sheets
- Joined
- Jun 23, 2021
- Messages
- 55
DW is in a funk because we (62, 59) didn't use Roth all these years, mainly as we didn't pay attention but also because for the last 10 years or so, our AGI exceeded the limit. We now have a rather large nest egg, 2/3 of it in a tIRA, roughly evenly split) and the balance in joint brokerage. Our withdrawal rate to support expenses should be under 3%. A small amount has been IRA-invested post-tax, which will be converted to Roth, but it's relatively minor.
While trying to placate her I came up with the following example. Yes it uses some assumptions but calcs of this type usually do. I understand tax rates may rise (is this guaranteed?), one spouse may die, placing the other in a Single (higher) bracket, etc. But these are maybes.
Base assumptions:
- $1M starting amount in either case
- Invest for a period of 10 years, withdraw entire amount at that time, pay any applicable taxes.
- 7.2% growth rate (for easy computation using rule of 72, so that money doubles).
- (Fed+state) tax rate 33.33%, again for easy computation. Stays steady.
Scenarios:
a) tIRA:
Year 0: Invest $1M
Year 10: value doubles to $2M
Pay $666.7K taxes
Take home $1.333M
b) Roth:
Year 0: Invest $666.7K after paying taxes on $1M
Year 10: value doubles to $1.333M, all of it take home
Take-home difference is zero.
Yes I'm sure there's a flaw or three, so please be kind.
While trying to placate her I came up with the following example. Yes it uses some assumptions but calcs of this type usually do. I understand tax rates may rise (is this guaranteed?), one spouse may die, placing the other in a Single (higher) bracket, etc. But these are maybes.
Base assumptions:
- $1M starting amount in either case
- Invest for a period of 10 years, withdraw entire amount at that time, pay any applicable taxes.
- 7.2% growth rate (for easy computation using rule of 72, so that money doubles).
- (Fed+state) tax rate 33.33%, again for easy computation. Stays steady.
Scenarios:
a) tIRA:
Year 0: Invest $1M
Year 10: value doubles to $2M
Pay $666.7K taxes
Take home $1.333M
b) Roth:
Year 0: Invest $666.7K after paying taxes on $1M
Year 10: value doubles to $1.333M, all of it take home
Take-home difference is zero.
Yes I'm sure there's a flaw or three, so please be kind.