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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76392  
Subject: Re: 401k versus Roth IRA Date: 3/30/2008 11:49 AM
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My tax rate currently is very low, I believe only 15%. Probably at retirement age it will be the same or higher don't you think?

If you are truly in the 15% marginal bracket (2007 taxable income less than $63,700 for MFJ), are you expecting your retirement income to be significantly greater? Otherwise, it is likely that your marginal tax rate will be the same or less, at least until Congress raises the rates.

With the income you have outlined: We will both have social security hopefully and my husband has a small pension plan in addition to your 401k/403b money, I suspect that you will remain in either the current 10% or 15% marginal bracket.

In what order of priority is it best for us to save for our retirement?

Generally,

1. 401k/403b to the match
2. Max out Roth IRA (if eligible)
3. Max out 401k/403b ($20,500 if 50 or older)
4. Taxable accounts

If your 401k/403b have high expenses, you may want to drop #3, but unless the expenses are really outlandish, you should still do #1.

And in what order should you start taking money out to live during retirement.

It depends a lot on your tax sitation and your age when you retire.

You can take Roth contributions out at any time tax and penalty free, but earnings must wait until you are 59 1/2 or meet one of the other exceptions outlined in IRS Pub 590. Disability is a permissible exception, so your husband may meet that.

If you leave service from your company in the year you turn 55 or older, you can take 401k/403b money out without penalty (but you will still owe taxes). However, the plan rules for withdrawals must be followed, so check to see if your plan imposes any rules about withdrawals.

If you roll your 401k/403b over to a traditional IRA, you will not have any plan restrictions on how you can take the money, but it will not be penalty free unless you are 59 1/2 or meet one of the other exceptions outlined in IRS Pub 590.

Taxable account mutual funds can be used at any time, with appropriate taxes.

Will you continue working after your husband retires? Can you get health insurance through your job for both of you?

AJ
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