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I've been reading this board for awhile and have a question.

I know the conventional wisdom here is to contribute to the matching on the 401(k), then switch to the Roth up to the $3K per year. If funds for investing remain, then fully fund the 401(k). The assumption being that tax rate in retirement will be higher than present tax rate, so the Roth is better than the 401(k).

My question is regarding the higher tax rate in retirement. For example, if a person is making $100K now and contributing to retirement, obviously he/she doesn't need/have $100K to actually live on, or no funds to invest. Assuming a 4% withdrawal rate equal to $100K in retirement, he/she would need $2.5M in retirement accounts to accomplish this. That would mean that the tax rate would be the same (assuming no raise in tax rates), right?

So, is the belief that this person would actually increase withdrawals in retirement above present salary? More like $150K? This is the only way I could see tax rate being higher in retirement, i.e. withdrawals being higher than original working salary. Is this pretty standard - to INCREASE living standard in retirement?

The reason I'm asking is, we're a little late to retirement savings - 40's. We make over $100K per year. However, I've done the math and see no way we'll have over $2M saved in the next 15-20 years, even putting away 25% of our pay. (Or, am I just being pessimistic about returns?) That said, assuming we can withdraw about $50-70K per year "safely", won't this put us in a lower bracket? Wouldn't this be an argument for fully funding the 401(k) BEFORE contributing any to a Roth?

Just trying to decipher the advice here.

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