anonenigma wrote: ↑Sat Jul 17, 2021 6:05 pm
02nz wrote: ↑Sat Jul 17, 2021 3:21 pm
anonenigma wrote: ↑Sat Jul 17, 2021 1:51 pm
...
This means that teachers may not be in a significantly lower tax bracket in retirement, which erodes the advantage of traditional contributions and tilts a bit towards Roth. Maybe Roth contributions early in career when income and marginal tax rates are lower, traditional contributions mid-career and, depending on how one's financial future is shaping up in the ten years prior to projected retirement, Roth again? Now that I'm on Medicare, a significant consideration is IRMAA cliff planning. I didn't know about this when it would have mattered, but there wasn't a Roth option for LAUSD's 403(b)/457(b) back then anyway. There is now a Roth option for the 457(b) plan, so edge to 457(b) if you want to do Roth.
Generally good advice, but here the teacher is married to a higher earner (OP), and so they benefit from deferring taxes via traditional contributions.
Missed that - it was later in the thread. In that case, they should probably max both the 403(b), which can only be traditional (again, either CalSTRS Pension 2 or TIAA), and think about whether the 457(b) should be traditional or Roth. The danger, for the long-lived, is RMDs at 72 pushing them off an IRMAA cliff. The LAUSD teacher spouse will hopefully qualify for lifetime health benefits for both of them, but one still has to pay Medicare.
OP, I'm curious, when did your spouse sign on with LAUSD? The answer will determine what's needed to qualify for the lifetime benefits, which are extremely valuable.
@anonenigma - thanks much. Your expertise here is much appreciated. I'd love to get your feedback on the below thought process - what do you think?
Some additional details/updates since my original post.
+ Spouse's first year as a full time teacher at LAUSD teacher was 2015.
+ Since original post, we have opened a 457b and are waiting for LAUSD to process.
+ We should be able to come within a few k of maxing out 457 in 2021. We prioritized 457b because we can access the money early. We have prioritized pre-tax rather than post tax to lower our taxable income while it is high. It's too late in the year to open both a 457b and 403b so plan to open 403b in 2022.
+ Plan for 2022 is to max out 401k, her 403b, 457b, and Roth IRAs through backdoor conversions. We only plan on maxing out pre-tax accounts for a few years to hit a reasonable coast FI balance - just want to max out accounts before kids arrive on scene.. We might perhaps shift to Roth contributions at that point.
About our financial picture:
+ Age: DW is 35, I am 33
+ Net/joint income ~$310k annually
+ Net worth: $577k
+ Retirement balance is $211k.
+ My pension cash balance: $31.3k
+ Her pension cash balance: $35.4k
+ My 401k: $109.1k
+ My inherited IRA: $10.3k
+ Her Roth: $10.8k
+ My Roth: $14k
+ Taxable Investments: $308k
+ Cash (emergency fund): $58k
+ Debt free