Comments by "donaldlyons17" (@donaldlyons17) on "Jake Broe"
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I don't see how people consider any of this to be a waste. If I read right a huge percentage of the total population only has 200K saving for retirement so if you can find a way to live off that I think you will be fine regardless of what you do!!! I feel for those who have no money in retirement though and that is easy to do because you have to make more than break even wages to have money over time in my option. Your quote: (Hey Jake. I'm been a follower of your videos for a while, I really appreciate what you do, I've learned a lot. However, I'm also one of those people who left you a comment on your previous video on this topic disagreeing with your thesis, and I hope you won't mind if I continue to (respectfully) disagree.
First, I don't really like the behavioral argument that you make. You claim that people erroneously contribute the same amount whether they're doing traditional or Roth. I think this is a weak argument. Do you have any data that backs up this claim? I feel that it's anecdotal. If I'm in a high tax bracket, I would consider increasing the percentage and doing traditional. The idea that "everyone likes round numbers" is not an argument. Especially when you and I both know that your audience is a lot more savvy and mathematically inclined than the average person, it's really not hard math to do. When it comes to IRAs, yes, it's true that the limit is $6000 regardless of whether it's traditional or Roth. And it's true that if the individual takes the tax break from the traditional IRA and wastes it, they'll come out behind. But what if they take that tax break and invest it in their taxable brokerage? Or invest it anywhere else. You could easily come out ahead, depending on your current tax bracket and the tax situation you expect in retirement.
And that's the biggest thing I think you're leaving out. There are a lot of different ways to "do" retirement. Here's a "classic" way to pay zero taxes in retirement:
Withdraw from traditional assets for the first $24k ($12k if single), to take full advantage of the standard deduction
Withdraw long term capital gains from taxable brokerage for the next $80k ($40k if single), to take advantage of the 0% long term capital gains rate
Withdraw the rest (if needed) from Roth assets
By following this formula, you will pay zero taxes in retirement. In order to do this, you need a mix of retirement assets. It's not just one or the other. My plan is to have all three. I contribute to the Roth right now while I'm young, my income is low, and my tax bracket is low. When I'm older and have a real career and real money flowing in, I'll contribute some to traditional. Along the way I'll be using my taxable brokerage too. It's about maximizing the benefits of all account types. Traditional assets are not a waste. Even if you only want one account type and aren't willing to have this mix, those who are in a very high tax bracket right now might want to just do traditional only. Some people plan to live very simple retirements, and will be in a very low tax bracket in retirement. If that's the case, doing only traditional is the right move. I think you are massively oversimplifying the tax planning that goes into retirement, and you're underestimating how individual this stuff is. If you want to live off hundreds of thousands of dollars per year in retirement, great, go Roth most of the way. You should still c)
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