At the moment I’m 28 and have about 25k in ROTH, only 10k in IRA, and 65k in taxable accounts, with about 50k income and 8k of expenses per year. Hi madfienist I appreciate the simple illustrations representing Roth and Traditional IRA as well as 401k and 403b. 1) My 401k is pretty awful. You could check out Vanguard’s HSA partner, or HSA Bank. Those of us (me for one) planning to retire early while enjoying a six digit income in retirement, need to plan/model withdrawal strategies in retirement before we retire. So, when you retire early and have a lower income, especially until social security kicks in, you are in a lower tax bracket. What you’ll notice though is that Investor B actually has quite a bit more in his taxable account. I have a question about the future 401k to traditional IRA then Roth IRA conversion. Oh man, thanks for the link to the actual tax bill, but I am not a glutton for punishment! If one did, say, a lump conversion on their year of FI this strategy wouldn’t make sense. You say, “The upfront tax deductions provided by traditional retirement accounts are the reason this strategy is so beneficial.”. So when you retire and you are married filing jointly and you are trying to do the conversion. Hey Brian, glad to hear you’re enjoying it around here. At age 40, both investors stop contributing to their accounts and begin withdrawing $18,000 per year from the taxable accounts. “you should convert an amount equal to your deductions and exemptions (assuming you have no other ordinary income).” Hello mad fientist. We also have two rentals, one of which we are selling when it becomes vacant in July. First of all, congratulations. The Mad Fientist's powerful credit card search tool allows you to easily find the best credit cards for your specific travel needs! I have a post about the seminar, Taxes in Retirement, on my blog for those interested (BossManJax.com). ‎For those who have money… or want more of it! Having money in all these buckets offers you more tax planning opportunities not only in early retirement but once you start drawing on social security later. Thanks, Mad Fientist! Cheers, Andre, Andre, my $.02. In 2017 I made $210,000/gross and $193,000/net. At low income levels the tax credits are substantial — hundreds of dollars a month, or thousands over a year. Now, I still think your traditional-to-Roth conversion strategy is great and probably worth the cost of being able to shelter a little less money from capital gains taxes. Read this, http://danielamerman.com/va/BenefitAge.html, We’re still working on our capital gain harvesting for 2017. I’ve tried reading through the US-France tax treaty but it’s not easy to understand. You can’t touch your earnings until later without a fee, but you can always take out the money you put in. How would this apply to TSP vs Roth TSP? Today we’re joined by a friend of the BiggerPockets podcast network, Brandon “The Mad Fientist”. Sure! Look forward to reading your new post. My wife is a sole propietor and makes $20K-$40K/year, but maxes out her solo 401k and Roth; Also, we have about $250K in tax deferred (401ks/IRAs) and another $75K in Roths. We also may travel further now knowing the power of points for great credit! Now, however the point is moot. This is called a “Backdoor Roth” … As far as what’s next for the Mad Fientist, I plan to release more software to help people who are on the path to FI. I do have a ROTH IRA from before we got married when I wasn’t exceeding the income requirement. I do agree taxable money should be used before withdrawing from Roths in most situations though. Never once did anyone mention converting our regular IRA’s to ROTH after leaving employment. I think its an slam dunk to open an self-employed 401(k) if you are self employed. I’d like to wait till 70 to apply for SS. The standard deduction in 2018 for married filing jointly is $24K, so ignoring probably little amounts like interest income on your savings, the amount would be about $24K. Is there an income tax disadvantage to doing the conversion during our working years? Thanks, GubMints! Were you able to take advantage of the foreign income exclusion? It’s a shame that 401ks are dripping with fees. Does someone know where my assistant could possibly access a sample MHA Dodd-Frank Certification copy to type on ? Thanks for the kind words and I hope to hear from you again soon! Hello! Good point Matt. I guess there’s always next year… I did some quick calculations and our MAGI should be below $98K no problem since I max out my 401K and plan to max out my HSA next year as well (since I also read that article here). In fact, if you convert an amount equal to your deductions, exemptions, and credits every year (and assuming you have no other ordinary income), you could execute these conversions without paying any tax at all! It has everything you need to know! . Our available tax advantaged space is almost 60% of our after tax income. Is that the right call? You still have time to get it done by 12/31/2017. I have a 457 plan that I plan to contribute the max to for another 10 years, at which point I will be 60 (not that early, I know…) and the account will have about $350,000 in it (it’s earning 4% in Voya [formerly ING] and is 100% invested in “stable principal,” meaning nowhere near the stock market). Great article, Ron. Join over 100,000 others on the Mad Fientist email list to get access to exclusive content and software! Will I still be able to fund a deductible IRA as well to add another $13K? I’ll probably write a post about it after I look into it more next year. Find out how you can access retirement funds early (without paying any penalties) and learn the best withdrawal strategy for early retirees! Is there anyway around this? 1. Thanks for the nice analysis and I will be adding your blog to my RSS feed. As a non-US citizen not working in the US, I’m not sure having a US account would be beneficial or wise. After a the Roth ladder contributions for living expenses your HSA post and still haven ’ t make enough double... Could check out this comprehensive summary by past podcast guest, Michael Kitces years after early retirement for me well., where should we be doing with our investments in order to your. Providing via this FI newbie state you lived in stays as your plan and! 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