Cant 23k of the 60k be pretax personal contribution?

Seems like if you got 37k into a mega backdoor then let spillover go untaxed its a “freebie”.

The 23k personal contribution will cost 8k in taxes to Mega.

 

Are you saying pull $300k/yr on the 4.2M or total income with a pension? If that’s just on the portfolio at 7+%, sequence of return risk is real, especially if you are planning on inflation addition and a potentially long retirement if going @ 60.

I know Ramsey came out with an 8% withdrawal rate, but most are only looking at a 6-8% ROR nearing retirement if being aware of SOR risk and having a more conservative portfolio. Some like the 4% rule for drawdown and it has a high likelihood of success. Earlier retirement may need more of a 3% rate of withdrawal and allow the portfolio to take care of inflation. Especially true if you are covering the retirement for your spouse and may want to leave legacy assets.

 

Not more than the initial amount. Our 401K allows for automatic conversion and 401A (401 After Tax) is already taxed to start. So if you drop in $10k after tax, it hits the 401K, and then will automatically convert to Roth before a penny of gains. It then grows tax free.

If you want to roll out the money before 59.5 when doing 401A you CANNOT have auto convert on. You would instead contribute 401A and call each time to move the money to your Roth IRA.

To add- if you don’t auto convert and leave 401A money in the 401k, gains on that money are taxable (only the basis remains tax free). So either auto convert or roll it out to your Roth IRA (and then SDIRA if that’s your desire).

 

300K/yr without a pension. I use a withdrawl calculater from Bankrate and put in different interest rates but I use 5% as the lowest. The Vanguard fund I'm in had done about 12% LOF, so at least 10yrs of that interest rate. https://www.360financialliteracy.org...ion-Calculator

Here's the link.

 

I don't know your plan so what you say is more accurate than what I know.

 

Higney posts lots of good information. To go deeper in reading about safe withdrawal rates and sequence of return risk, take a look at The Safe Withdrawal Rate Series. 'Big Ern' has written extensively about it on his blog site, Early Retirement Now He's got a PhD in econ, worked at the Fed, in academia and industry but his writing is even accessible by me.

 

yes. You can do 23k pretax. 401A becomes another available “bucket” if desired. That strategy can work quite well if you are in a very high tax year but also want to save for retirement. Many use profit sharing to fill the traditional 401k bucket and normal paychecks to do 401A as it’s taxed regardless. Once full the MBCBP takes the rest unless you are one of the 2,700ish that opted to keep getting spill/excess.

 

I think I missed the earlier post’s point of the $23k pre-tax on the first pass through.

So you’re saying the most tax efficient angle is to max employee pre-tax, then fill in the rest with 401a -> Roth (to max extent possible, not a full $46k, due to “racing” the company) forcing the 17% to spill into the MBCBP?

 

The SWRS is great reading, especially for folks looking to punch out early. You don’t have to mirror the exact allocations of his simple portfolios, but the analysis gives you a lot of good directional information to learn from. He covers a lot of ground in the series from different withdrawal strategies, tax planning, lifetime asset allocation perspectives, Social Security, supplemental cash flows, etc. All great stuff and I echo the thought that you’ll learn a lot from reading. It’s also been written over 8 or more years, so it’s interesting to read with hindsight.

It can get in the weeds though. I find when it’s gone over my head, skipping to the conclusions at the end of each part (there’s like 60) is helpful.

 

let's set the brake for just a sec.

I say that because strategy can be very different based on taxes and goals. If you want to save the most possible on taxes this year, sure- the pretax option exists. A sample scenario is the last kiddo is coming off your tax return in 2024 and you just made the move to WB-A. Your income is now higher and you have less in deductions, and you realize that your standard of living is now below your income by a big margin. This may be a time to lower your tax bill, yet still save for that long and fun retirement.

If you have deductions still (known as dependents) and haven't made it to the planned "peak" earning years, it may make more sense to bite the tax bullet now with Roth instead of conversions or taxable income later.

Everything walks back to the "why" in the savings plan. That plan can and will change as life happens and desires change. One year it may make a lot of sense to race the company and jam as much into Roth as possible, other years you may do the complete opposite. If you are saving overall, you are doing better than most. When it gets hard to determine how to save excess money, it could be time to bring a financial planner into the mix.