(149611 - 0.85 * expected social security) * 25 = target pre-tax balance to fill std ded/10%/12% at 4% withdrawal rateHow does social security figure in? You've omitted that entirely.
Suppose a 30-year-old single makes $60,000 today, placing them in the 12% bracket after standard deduction. They contribute 8% on their own to Roth 401(k) and accordingly receive a 4% match to pre-tax 401(k). Assume 3% annual inflation and salary growth, and a 7% rate of return. After 30 years the Roth account grows to $665,753 and the match account grows to $332,877 (half that). The standard deduction grows with inflation to $35,355, and the 22% bracket floor to $114,256. Using a 4% withdrawal rate (25x), the retiree needs $883,875 in pre-tax just to take full advantage of the standard deduction, and another $2,856,400 to fill the 10% and 12% brackets. So there was no benefit to do Roth at 12% in that case. It is true that taxes could go up (and are scheduled to do so under current law), but this also doesn't account for any opportunities to Roth convert at 0% or 10% along the way either. Getting married, divorced or widowed along the way changes the brackets and standard deduction around a lot as well.
Statistics: Posted by Makefile — Thu Feb 20, 2025 9:22 pm