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Help Me Retire: I’m a single dad maxing out my retirement accounts and earning $100,000 – how do I make the most of my retirement dollars?

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Dear MarketWatch, 

I make over $100,000 a year, and expect to for the foreseeable future. As of now, I am contributing 8% of my income to my 403(b) with a 3% 401(a) match; all Roth. It would be more, but I am maxing out a Roth IRA and an HSA as well each year. I am a single father with a 9-year-old daughter, and do not have plans to marry, so I’m planning everything as single. I expect house to be paid off when I (plan to anyway) retire at age 65. I plan to collect Social Security at 67.

My question is, should I move my 403(b) & 401(a) income to pretax dollars, since I expect to be in a lower tax bracket echelon once I retire? Or leave it at Roth. I’m hoping for some advice on what would generally be the most prudent option to maximize retirement dollars. 

See: I’m a 39-year-old single dad with $600,000 saved – I want to retire at 50 but don’t know how. What should I do?

Dear reader, 

First, congratulations on maxing out your Roth IRA and HSA and contributing to your other retirement accounts — managing that while being a single dad and paying off a home is no simple task. 

You’ve asked the age-old retirement planning question: should I be investing in a traditional account, or a Roth? For readers unaware, traditional accounts are invested with pretax dollars, and the money is taxed at withdrawal in retirement. Roth accounts are invested with after-tax dollars upon deposit, and then withdrawn tax-free (if investors follow the rules as far as how and when to take the money, such as after the account has been opened for five years and the investor is 59 ½ years old or older).

As you know, the rule of thumb for choosing between a Roth and a traditional account comes down to taxes. If you’re in a lower tax bracket, advisers will typically suggest opting for a Roth as you’ll be paying taxes at a lower rate now versus a potentially higher one later. For a traditional, you may be better off if you’re in your peak earning years and expect to drop a tax bracket or more at the time of withdrawal. 

One of the greatest challenges, however, is knowing future tax brackets. You may think you’ll be in a lower one now, but you can’t be sure. We also don’t know what tax rates might even look like when you get to retirement. The current tax rates are expected to increase in 2026, when the brackets from the Tax Cuts and Jobs Act are set to expire. Congress may do something before that, or after of course.

Check out MarketWatch’s column ‘Retirement Hacks’ for actionable advice for your own retirement savings journey 

That being said, if you believe you’ll be in a lower tax bracket in retirement, it doesn’t hurt to have some of your money go in a traditional account. Having tax diversification can really work in your favor, too. It allows you more control and freedom when retirement does come, as you’ll be able to choose which accounts you withdraw from and how to save the most on taxes. The more options, the better. 

You should do your best to crunch the numbers now, and then make a plan to do it every year or so until you get to retirement. Here’s one calculator that can help

Make estimates where you have to, and factor in inflation — I’m sure we’ve all seen how inflation can impact personal finances in the last year alone. There are a few other things you can do to make these calculations. For example, get a sense of what your Social Security income may be by creating an account with the Social Security Administration, which will show you what you could expect to receive in benefits at various claiming ages. Also add in any other income you may get, like a pension.

After you calculate what you expect to spend in retirement, you can figure out what your withdrawal needs will be — and how that will impact your taxable income depending on if the money comes from a traditional or Roth account. Remember: Withdrawals from Roths do not increase your taxable income, whereas traditional account investments do when taken out.  

Keep in mind, Roth IRAs have one really great advantage over traditional accounts — they are not subject to required minimum distributions, which is when investors must withdraw money from the account if they haven’t yet done so by the mandatory age. Traditional employer-sponsored plans, like 401(k) and 403(b) plans, are subjected to an RMD. Roth employer-sponsored plans have also had an RMD, though the Secure Act 2.0, which Congress passed at the end of 2022, eliminates the RMD for Roth workplace plans beginning in 2024. (The Secure Act 2.0 also pushed the age up for RMDs to 73 this year, and age 75 in 2033.) 

Also see: We want to retire in a few years, and have about $1 million saved. Should I move my money to a Roth, and pay off my $200,000 mortgage while I’m at it?

Traditional versus Roth accounts are just one piece of the puzzle in retirement planning, though. There are many other questions you need to ask yourself, and a financial planner if you’re interested and able to work with one. For example, what rates of return are you anticipating on your investments, and how are your investments allocated? What state do you live in now and will that change in retirement (that will affect your taxes). Are you concerned about leaving behind an inheritance, and have you considered life insurance? And even before you get to retirement, as a single dad, do you have a will, healthcare proxy and disability insurance in the event something unfortunate happens? 

I know this may feel overwhelming, especially when you’re taking into account calculations and estimates for years and years from now, but it will all be worth it. Consider working with a qualified financial planner, or talking to someone at the firm that houses your investments, and don’t feel obligated to stick with whatever you choose until you retire. As with many things in life, retirement plans tend to change and adapt as you do. 

Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com

Readers: Do you have suggestions for this reader? Add them in the comments below.

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