I could use a sanity check here as I'm re-thinking our current strategy.
Specifically, I've only recently realized our maxing out our tax deferred accounts (Thrift Savings Plans) may not be the wisest decision given that the Tax Cuts and Job Act (TCJA) has an expiration date just 5 years before we pull the plug.
In 2030, our target RE year, we anticipate our COLA'd pensions to equal $137,800/year after federal income taxes (we don't plan on living in a state that taxes military pensions). There are two possibilities:
At best, it looks like we are deferring taxes to end up in the same tax bracket, best case. And there is no guarantee the '17 tax brackets won't return. It feels like a gamble with odds not in our favor.
If we stop contributing to our tax deferred accounts (TSP), our marginal tax rate will increase. Still, I'm not convinced a higher marginal rate is enough of a reason to contribute 41K/year to our TSPs ('22 limit). The risk seems high that we're missing a lower tax rate between now and retirement. We could take that 41K/year and throw it into our after-tax account at Vanguard.
What am I missing?
TIA!
Specifically, I've only recently realized our maxing out our tax deferred accounts (Thrift Savings Plans) may not be the wisest decision given that the Tax Cuts and Job Act (TCJA) has an expiration date just 5 years before we pull the plug.
In 2030, our target RE year, we anticipate our COLA'd pensions to equal $137,800/year after federal income taxes (we don't plan on living in a state that taxes military pensions). There are two possibilities:
The TCJA expires in '25 and the tax brackets revert to the '17 model. We will fall in the 25% to 28% depending on how much we withdraw from brokerage.
The TCJA is extended for income taxes and we fall in the 24% bracket like we're in now.
At best, it looks like we are deferring taxes to end up in the same tax bracket, best case. And there is no guarantee the '17 tax brackets won't return. It feels like a gamble with odds not in our favor.
If we stop contributing to our tax deferred accounts (TSP), our marginal tax rate will increase. Still, I'm not convinced a higher marginal rate is enough of a reason to contribute 41K/year to our TSPs ('22 limit). The risk seems high that we're missing a lower tax rate between now and retirement. We could take that 41K/year and throw it into our after-tax account at Vanguard.
What am I missing?
TIA!