No. of Recommendations: 1
the tas deffered accounts such as Traditional IRA, 401k, and 403b are taxed as NORMAL INCOME when distributed at retirement. This means that the distributions are subject to the 'income tax rules' of the day.

Because I expect to have a retirement income that exceeds the top tax bracket - I personally would NOT max one of these accounts.


I'm reading the book "The Coming Generational Storm" by Kotlikoff and Burns. They talk about the potential of 401Ks becoming tax traps for some people. From what I can gather, they recommend paying taxes now because they feel that marginal tax rates will be much higher in the future. This reinforces what I've personally been doing with my 401K contributions.

Unlike when I was younger and contributed 16% of my gross salary to my 401K account, I now only contribute 6% of my gross salary to my 401K account. This amount is the minimum 401K contribution that allows me to obtain the maximum employee match (3% of gross salary). I fully fund my Roth IRA and place the rest of my savings into taxable accounts.

With my luck, when I start taking money out of my Roth IRA, the future government will start taxing Roth IRA withdrawals. <g>

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.