174 - Is Roth or Traditional Better for FIRE?

Scott and James discuss if Roth or Traditional is better for FIRE (Financial Independence, Retire Early).

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Listener Question:

I’m wondering if I should change my 401k strategy from traditional to roth?  I’m a 35 year old high earner making around $175k a year plus bonus.  I’m currently maxing my traditional 401k plus a 5% match from my employer.  I need to work another 7 year to hit my FI number ($2.5M) and I have $160k in my traditional 401k right now.  When I run the numbers on compounding interest, I show that I’ll have somewhere between and $1.2M - $2M in traditional when I hit 59 1/2 if I just continue getting my match (no more personal contributions).  I feel like if I continue to contribute to traditional 401k, I will have a huge tax bill when I hit 59 1/2 and I'm worried about RMDs.  What should I do?  Do I continue to take the tax deduction now since I’m a high earner or transition to roth to create more tax diversification?  On a side note, I’m already performing a roth ira conversion each year ($6k), maxing my HSA ($7.3k), and contributing to a brokerage account monthly ($1.5k).

Planning Points Discussed

• Utilizing Time Efficiently
• Capital Appreciation
• Purchasing Power
• Other issues (IRAs, Inflation, Financial Goals, etc.)

Timestamps:

2:30 - We're on YouTube HERE!

4:35 - Listener Question Summary

8:37 - Tax Basics

13:47 - 401(k) Maximum

18:20 - Optimize Income & Savings

21:57 - Savings Rates

24:22 - Personal Capital

26:00 - Aligning Your Financial Goals

LET'S CONNECT!

James

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Scott

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