No. of Recommendations: 0
Hi All,

I spoke with a financial advisior a few days back. I'm currently maximizing my 401K and Roth. I was somewhat surprised that she recommended I consider reducing the 401K and starting a taxable IRA. Her logic was that capital gain taxes may end up been lower than either my current marginal tax rate (i.e what I'm paying on the ROTH) or my tax rate in retirement.

A little back ground - I'm firmly in the 25% tax bracket at the moment. I investing fairly heavily for retirement and will benefit from a defined benefit plan with a result that my best guess is my income in retirement will be similar to that while working. Looking ahead (as much as one can) its likely that capital gains taxes will rise for those in the 28% bracket but the 25% bracket may remain 15% for now. The challenge is I'm relatively young (37) and tax rules could change many times between now and retirement.

What do people think of the advice? I was thinking of a taxable IRA but only for any additional investments beyond my pension. I hadn't thought about potentially reducing my 401K (any reduction wouldn't be below the level of matching).

I'll be honest in saying I quite like the idea that the bulk of my pension investments are relatively inaccessible. The final thought is I expect my income to rise over the next few years so perhaps that the time to start a taxable IRA? I do like the idea of having a variety of income sources in retirement so I can do as much as I can to keep my taxable income as low as possible (though thats some what difficult with a defined benefit plan, SS and 401K making the core with only a smaller portion been the ROTH.

Any thoughts?

Jonathan
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