nun
Thinks s/he gets paid by the post
- Joined
- Feb 17, 2006
- Messages
- 4,872
I've been running some numbers to compare the option of using a 401a account balance of $263k to buy back into my state's pension plan and get a generous COLA pension of $20k/year starting at 55 or keeping the 401a account, living off after tax money and making larger IRA to ROTH conversions. I have ample money in my after tax accounts to cover my expenses until SS starts and if I don't take the pension I can basically convert the entire 15% tax bracket amount each year to a ROTH......with the pension I can convert $20k less each year.
The results for my various account balances (assuming 5% annual growth) and income streams at age 70 are as follows.
Taking the pension
IRA = $1M
ROTH = $0.6M
After tax = $0.5M
Pension = $27k
US SS = $30k
UK SS = $20k
Not taking the pension and keeping the 401a account
IRA = $1.1M
ROTH = $1.1M
After tax = $0
US SS = $30k
UK SS = $20k
So I'll have to take similar RMDs and the size of the portfolios are also similar (the pension scenario has almost paid itself back) but with the pension scenario I have $27k extra in taxable income that I must take. For the 401a scenario I have been able to shelter all my taxable money in the ROTH and if I needed the $27k I could take it tax free from the ROTH. I'm basically trading guaranteed taxable pension income against a bigger tax free ROTH balance and the uncertainty of stock market returns.
These sorts of decisions are what makes retirement planning so complex and interesting. So what would you do....and importantly why?
The results for my various account balances (assuming 5% annual growth) and income streams at age 70 are as follows.
Taking the pension
IRA = $1M
ROTH = $0.6M
After tax = $0.5M
Pension = $27k
US SS = $30k
UK SS = $20k
Not taking the pension and keeping the 401a account
IRA = $1.1M
ROTH = $1.1M
After tax = $0
US SS = $30k
UK SS = $20k
So I'll have to take similar RMDs and the size of the portfolios are also similar (the pension scenario has almost paid itself back) but with the pension scenario I have $27k extra in taxable income that I must take. For the 401a scenario I have been able to shelter all my taxable money in the ROTH and if I needed the $27k I could take it tax free from the ROTH. I'm basically trading guaranteed taxable pension income against a bigger tax free ROTH balance and the uncertainty of stock market returns.
These sorts of decisions are what makes retirement planning so complex and interesting. So what would you do....and importantly why?
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