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  • Retirement contribution question

    I have just read the WCI book.  I understand the recommendation of preferably placing my retirement contributions into a tax deferred account so that when I withdraw retirement it will be taxed at a lower rate.  I mentioned this to my financial advisor (I know to beware, but he has been great so far....grey haired, CFP, ChFC, CLU--all good credentials, and very smart guy).  He has actually been recommending to his physicians to put this money into the ROTH option.  His point is the government is always looking to higher income people to spread the wealth.  If we are able to put away money that is taxed at a known entity, that is better than having it taxed later at who knows what of a rate.  I feel like he has somewhat of a point, but I am still very hesitant to comply because I dont feel the tax rate at my withdrawal "retirement" income will ever be has high as it is on my current income.  Any thoughts?  Could my CFP be trying to get money into a ROTH for other reasons?  The ROTH my wife and I would initially be contributing to would be from her employer/my private practice group.  Could he eventually be thinking he would "transfer it" to the ROTH he created for us during medical school?  The one where he gets an annual 0.025% kick back....

  • #2
    Disregard such advice. No one, him, you or I know for sure what tax rates will be in the future. People have been saying the same thing for decades about taxes and interest rates and theyve been wrong. You will have to be a prolific saver to incur a higher tax rate in retirement than now. Also remember we're talking about deductions at your marginal and when taxed it will be an effective rate.

    Plan using the rules of today, this is the only thing that is for sure.

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    • #3
      I can't think of why he would have an ulterior motive. Naturally, I presume this recommendation is per the dictates of the financial plan you and he have coordinated, monitored, and periodically adjusted per changes in your life, goals, and resources.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        It's unlikely that it would be more advantageous than the high-bracket deduction (esp 39.6%), but Roth has other advantages beyond growing and being drawn tax-free such as no RMD, ability to withdraw principal early, etc.

        So, there are some instances when a high-ish earner *might* prefer to have *some* of his/her retirement in Roth accounts - the backdoor Roth IRA is especially good if you can't make deductible IRA contributions due to being over the income limit or having an employer-sponsored plan - but for most situations the deductible account is better for very high earners (like lots of physicians).




        Disregard such advice. No one, him, you or I know for sure what tax rates will be in the future. People have been saying the same thing for decades about taxes and interest rates and theyve been wrong. You will have to be a prolific saver to incur a higher tax rate in retirement than now. Also remember we’re talking about deductions at your marginal and when taxed it will be an effective rate.

        Plan using the rules of today, this is the only thing that is for sure.
        Click to expand...


        I totally agree.

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        • #5




          I have just read the WCI book.  I understand the recommendation of preferably placing my retirement contributions into a tax deferred account so that when I withdraw retirement it will be taxed at a lower rate.  I mentioned this to my financial advisor (I know to beware, but he has been great so far….grey haired, CFP, ChFC, CLU–all good credentials, and very smart guy).  He has actually been recommending to his physicians to put this money into the ROTH option.  His point is the government is always looking to higher income people to spread the wealth.  If we are able to put away money that is taxed at a known entity, that is better than having it taxed later at who knows what of a rate.  I feel like he has somewhat of a point, but I am still very hesitant to comply because I dont feel the tax rate at my withdrawal “retirement” income will ever be has high as it is on my current income.  Any thoughts?  Could my CFP be trying to get money into a ROTH for other reasons?  The ROTH my wife and I would initially be contributing to would be from her employer/my private practice group.  Could he eventually be thinking he would “transfer it” to the ROTH he created for us during medical school?  The one where he gets an annual 0.025% kick back….
          Click to expand...


          For one thing, if you are in a high tax bracket, Roth should be one of your buckets, but not the only one.  Many advisers who charge asset-based fees will want you to move your money into a non-retirement plan account so that they can charge you their full fee. You'll know this very easily if

          1) They want you to move all of your money to their platform vs. keep it in a place such as Vanguard, Fidelity or Schwab

          2) They don't use low cost index funds and instead use managed funds that pay revenue sharing (such as 12b1 fees for example)

          3) They get commission from selling products, which negates their fiduciary standards down to next to nothing, so it doesn't matter if he has a CFP - in many cases that's just a cover for the other side which is a broker/commissioned salesperson, so in that case 1) and 2) is not a surprise at all.

          Just because someone has a CFP does not mean they are going to do what's in your best interest, especially if they are after your assets under management.  Always work with an adviser who is not interested in your assets, and is only interested in helping you put together a comprehensive plan, and is compensated by a fixed/flat fee that does not grow as your asset level grows.  This would ensure that there is no conflict of interest with regard to assets (and you'll also get a much fairer fee vs. asset-based one).
          Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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