Page 85 - Ready Set Retire

Ready. Set. Retire!

The income yielded by this approach is $35,000, 60% of which
is tax free. If the effective tax rate was 15%, and 60% is tax
free, that’s about a 9% bump, meaning income equivalent to
$38,461. To provide $38,400 a year income for 20 years, you
would need around $760,000. That means you must have a
guaranteed 8% rate of return for 10 straight years, after taxes
and fees, to even have a chance to yield the benefits of this
guaranteed income plan.

There’s more. When all of Bob and Judy’s money was coming
from the 401k for their entire lifetimes, the tax rates were high.
And it affected not just taxes on the income from the 401k,
but also the taxes charged on Social Security. One thing that
came about from this plan was a reduction in Social Security
taxes. This table illustrates what that can look like:

Figure 14: Impact of Roth Advantage on Social Security taxes

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