What percentage of your portfolio is tax deferred

[audreyh1]

I have to say I figured many people here would have high % tax-deferred accounts, but I figured more like around 50%. 2/3 of the responders have between 40% and 90% in tax deferred accounts - looks like midline of that group is 60-70%. That's much higher than I expected.

There is going to be a lot of Roth conversions going on I expect!

I'm not going to sweat our 13%.

 

[CardsFan]

I have to say I figured many people here would have high % tax-deferred accounts, but I figured more like around 50%. 2/3 of the responders have between 40% and 90% in tax deferred accounts - looks like midline of that group is 60-70%. That's much higher than I expected.

There is going to be a lot of Roth conversions going on I expect!

I'm not going to sweat our 13%.

I can't speak for others, but part of the reason for our high deferred rate (69%) is a combination of company match and rolling of company lump sum pension. Between the deferred taxes at 28%, and the company match at 6% in later years, I know we are still ahead of the game. Now, the pension would have been taxed as received, so while it is tax deferred, it could have been an annuity.

No complaints. Convert in 12% bracket for now, and then we will see.

If we pay an extra $50k to 100k in taxes over the next 20 years, oh well.

 

[Ed_The_Gypsy]

Doggies!


I ain't been in the lowest decile of anything since my first quarter in college.


I may start a poll.

 

[Rdub]

Without real estate about 13% in 401Ks, less than 9% if I include real estate. I have limited my cap gains this year, so I plan on rolling some of our 401K$ out and into our Roth IRAs and pay the tax. I would like to move 30 - 50% of our 401K$ into our Roth over the next 2 years, maybe stretch it out depending on who wins the election next year.

 

[neihn]

79% tax deferred, 3% HSA, 18% ROTH and about 15k in saving. Plan to roll over ROTH as much as I can in the next 10 years or so.

 

[audreyh1]

I can't speak for others, but part of the reason for our high deferred rate (69%) is a combination of company match and rolling of company lump sum pension. Between the deferred taxes at 28%, and the company match at 6% in later years, I know we are still ahead of the game. Now, the pension would have been taxed as received, so while it is tax deferred, it could have been an annuity.

No complaints. Convert in 12% bracket for now, and then we will see.

If we pay an extra $50k to 100k in taxes over the next 20 years, oh well.

No pension here.

But I was often thwarted in maximizing 401K contributions. We were a smaller company, and I was an early employee. I often fell in the higher compensation group and had to back off 401K contributions. I was able to put in enough for company match, but rarely above that - not nearly as much as I wanted to tax defer.

My salary was too high to qualify for a Roth or do tax-deferred IRA contributions. I did do some after-tax IRA contributions for 5 years.

Back then IRA contributions were limited to $2,000. Not much. By the time limits were raised, and catch-up contributions were allowed for older folks, I had already retired.

 

[misanman]

67% tIRA
19% Taxable
14% Roth

 

[Dtail]

Yeah IIRC, I was in the 33% tax bracket and thus everything went to TIRA, as couldn't contribute to a Roth.
OTOH, never thought about diversifying for retirement, as retirement was not even a thought until I effectively retired.

 

[NW-Bound]

In a sense. I should not complain. I rolled over my 401K into a mutual fund in 2009. Today it is worth 5X the original value, and the RMD on it is hefty.

Few things in life are as beautiful as buying low.

 

[audreyh1]

Few things in life are as beautiful as buying low.

Even if you have to pay large taxes on the gains!

 

[JohnnyBGoode]

Coming from the corporate world I contributed as much as I could to our 401K (made too much income to supplement with tax-deferred IRA). We are only 20% tax-deferred so I am definitely on the low side, but I guess that is a nice problem to have At least the withdrawal process will be a bit more straightforward since I won't have to pay taxes (other than cap gains, of course)

 

[YoungSaver]

78%. I realized my mistake too late. I have been actively trying to increase my taxable amounts so I can retire early.

 

[CardsFan]

78%. I realized my mistake too late. I have been actively trying to increase my taxable amounts so I can retire early.

I may be in the minority here, but IMHO you did not make a mistake by deferring taxes early (if you were in a high tax bracket), so you could invest more. It might not turn out to be optimal, but a lot better than not investing at all.

Now, in the case of retiring before 55, or so, yes, you do need to have some after tax money to live on so you don't pay an early withdrawal penalty

 

[Montecfo]

I may be in the minority here, but IMHO you did not make a mistake by deferring taxes early (if you were in a high tax bracket), so you could invest more. It might not turn out to be optimal, but a lot better than not investing at all.

Now, in the case of retiring before 55, or so, yes, you do need to have some after tax money to live on so you don't pay an early withdrawal penalty

I think you have this right. It is tax rate arbitrage. You come out better by deferring less tax only if you end up in a higher tax rate in retirement- a high quality problem!

The solution to having funds to retire early is to save more dollars overall. That is BEST done after maxing out tax deferred opportunities, assuming you will be in lower bracket in retirement, which is the case for most people.

That's the approach I took and it seemed to work. Will have a lot of room to take advantage of low brackets between now and 70. No big deferred LTCG to gum things up. No "tax torpedo" unless stocks go crazy over the next decade.

 

[lem1955]

83% Tax Deferred, 17% ROTH and HSA, barely any in Taxable. I am converting to ROTH up to the top of the 22% bracket each year. I have five more years to do conversions before age 70. I also work part-time and contribute the max to my ROTH each year. I expect to receive an inherited IRA, more taxable income and more shares in a private REIT in the next 10 years in addition to SS so I am spending tIRA according to the Variable Percentage Withdrawal calculator 5.3% this year. Tax payments on conversions are painful. But I know the tax torpedo will be worse, even if tax rates don't increase (which I am virtually certain they will.)

 

[Dtail]

83% Tax Deferred, 17% ROTH and HSA, barely any in Taxable. I am converting to ROTH up to the top of the 22% bracket each year. I have five more years to do conversions before age 70. I also work part-time and contribute the max to my ROTH each year. I expect to receive an inherited IRA, more taxable income and more shares in a private REIT in the next 10 years in addition to SS so I am spending tIRA according to the Variable Percentage Withdrawal calculator 5.3% this year. Tax payments on conversions are painful. But I know the tax torpedo will be worse, even if tax rates don't increase (which I am virtually certain they will.)

Perhaps spend down some of the TIRA in addition to Roth conversion, unless that is what you are doing already.

 

[lem1955]

Perhaps spend down some of the TIRA in addition to Roth conversion, unless that is what you are doing already.

Yes, that's why I am using 5.3% spend rate. My father says I should be even less frugal and spend more, but I can't be that confident. Maybe my mindset will change if this bull market continues a few more years. I am also not excited to move into the 24% tax bracket.

 

[jj]

10% post tax (7% Roth, 2% 529 plan, 1% HSA)

17% tax deferred (10% IRA, 7% treasury 'i' bonds)

73% taxable

It's interesting to me how 'all over the map' the results are. We have tried to diversify into Roth and HSA where possible for tax diversification in the past few years.

 

[RunningBum]

It's interesting to me how 'all over the map' the results are.

It's interesting but not that surprising. Some here are still working, and mostly putting their savings in 401Ks/tIRAs. Some are recently retired and only starting to convert, if they are even doing so. Some have been retired much longer, and may have a lot more converted, especially if they were aggressive about it.

To get anything useful out of this poll, you'd need to know if and how long they've been retired, and how old they are (or at least whether they are at RMD age or not).

As I've said before, when you are working, any income you can defer is advantageous. Once you are retired and facing RMDs, you'd really like to have as little in tax deferred accounts left as you can. The trick is to balance those two conflicting goals to pay the least amount of taxes over the years, perhaps even beyond your lifetime.

 

[Dtail]

It's interesting but not that surprising. Some here are still working, and mostly putting their savings in 401Ks/tIRAs. Some are recently retired and only starting to convert, if they are even doing so. Some have been retired much longer, and may have a lot more converted, especially if they were aggressive about it.

To get anything useful out of this poll, you'd need to know if and how long they've been retired, and how old they are (or at least whether they are at RMD age or not).

As I've said before, when you are working, any income you can defer is advantageous. Once you are retired and facing RMDs, you'd really like to have as little in tax deferred accounts left as you can. The trick is to balance those two conflicting goals to pay the least amount of taxes over the years, perhaps even beyond your lifetime.

Well stated.
I wonder how many folks try to calculate this concept at an early age?
On a related note, folks might fret over how much TIRA they have at RMD time, but if they were in a high (differential) tax bracket when deferring this income, overall it might still have been worth it.

 

[MBAustin]

Just under 70% tax-deferred, 10% Roth through conversions the past several years. The tIRA number is high because of my pension lump-sum rollover (about 40% of the total) and an inherited IRA (about 10%).

We've been offsetting some of the tax impact of our conversions by moving appreciated taxable assets to a donor advised fund so that the charitable deduction partially covers the conversion income.

 

[wannabefire]

Well stated.
I wonder how many folks try to calculate this concept at an early age?
On a related note, folks might fret over how much TIRA they have at RMD time, but if they were in a high (differential) tax bracket when deferring this income, overall it might still have been worth it.

We never calculated it, we just took the approach to maximize tax deferred savings (401k) and then save whatever else we could in taxable savings.

We are now both 50 ish years old and have been able to add larger proportions to taxable as our incomes have increased. We are currently about 50/50 tax deferred vs. taxable. Since we are increasing the amount of taxable savings, we will slant towards more taxable vs. tax deferred over the next 5 years.

After that, the plan is to be working less and therefore our taxable income will be much lower and we hope to make some Roth conversions up to the appropriate tax bracket (whatever that might be). The goal would be to lower our expected RMD so that we minimize the tax hit when we have RMD and SS. That will be nearly 20 years from now, but we are planning ahead and hopeful that tax rates stay low(er) for as long as possible

 

[ach88]

4% Roth, 31% deferred IRA & 401k, 15% Muni Bonds, 50% Taxable.

 

[ach88]

I better do the math. I guess the biggest worry is what will happen if one of us dies and the other is catapulted into a higher bracket.

Very good point. We are approaching the top of the 24% bracket. If one of us dies the survivor would be in 35% bracket for fed and 10.3% for state. I guess we need to get more aggressive on Roth conversions.

 

[ikubak]

32% Roth
8% non retirement equities
60% Traditional IRAs or 401k

The plan is to spend down the traditional IRAs and 401ks now and let the Roths grow.