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Kjs1 writes in part:

<<You mentioned in the discussion that, for most people, their marginal tax rate declines when they retire. You also talk about the inability of those people currently in the higher tax brackets to utilize tax deferred vehicles available to those with lesser incomes.>>

Well actually I said"

"…reveals that if John's tax rate remains the same, the Roth IRA and the traditional IRA will provide the same net income after consideration of income taxes. However, if John's marginal tax rate declines at withdrawal, as it does for many retirees, then he is better off in the traditional IRA."

That "many retirees" is true, but doesn't translate into "most retirees." Indeed, I believe that "most" in the sense of a plurality will be in the same marginal tax bracket in retirement; a significant minority (and hence "many") will be in lower bracket; and a few will be in a higher bracket.

<<Personally, my family's current marginal taxes will be increasing, and approaching the level where some of these options are phased out. Wanting to "get ahead of the curve," the Roth seems, at the moment, to be a better place to stash savings after the 401k match is fulfilled using my assumptions.>>

Given your assumptions, I would agree.

<<All this thinking leads me to another question:
I have noticed that the well-paid executives at many companies do not contribute to company 401k plans. What do the rich do to shelter their income? >>


It's been my experience that most will still continue to contribute as much as they can to defined contribution plans. Additionally, they often have nonqualified deferred compensation plans that provide current tax shelters but immediate taxation on retirement. Don't pity them too much. They have such things as pension restoration plans, options, etc., that help them through the horror of paying taxes. Indeed, they aren't hurting as much as the middle executive earning between $75K to $125K is.

Regards…..Pixy
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