Every now and then I drive to conferences to learn more about investing and hear from industry specialists. This past month I attended a conference in West Palm Beach on retirement planning. On my way down the Florida Turnpike, I noticed that my E-pass battery wasn’t working. Luckily, I had some change and some cash so I was able to pay the tolls as I drove. I noticed that since I had both cash and change in my car I was able to pick the toll lane that had the fewest cars in it. This helped save time because I had choices for how I wanted to pay the tolls.
Having choices can help when it comes to how to take your distributions in retirement as well. We often recommend you have some savings in both Pre-tax and Roth accounts when suitable so that when it comes time to withdraw money in retirement, you will potentially have choices. If you have Pretax and Roth accounts, it gives you the choice of taking money out, depending on the current tax rate. If tax rates rise, it may be helpful to take money from your Roth (qualified distributions are tax free) and in years when the tax rate drops it could be beneficial to withdraw from the Pre-tax accounts. It’s very similar to the toll booths: if you have options it can help you plan how best to withdraw your money in retirement.
If you have any questions about whether Pre-tax /or Roth are right for you, please let me know.
Add your comments:
Items in bold indicate required information.