Well, since I am personally very familiar with this couple, I can tell you that none of what followed was correct. Their home, that they purchased in the last decade for 400k is worth maybe 600k today.
There are no stock options. Taxable investments are <$200k.
Plus your other comments go further to support my position. To whit:
in general a 10% savings rate is nowhere near enough ($40k on a $400k income), usually a 20% savings rate is the minimum when considering early retirement, so that would be saving about $80k of a $400k income.
Which I am stating is not very likely.
That is why I am claiming that a couple earning $400k a year in their early 50s is unlikely to be pulling more than $400k a year from their retirement accounts - for various reasons.
Further, a couple in the highest tax bracket, letās say $800k a year, will not likely have had the means to save in a tax deferred account enough to have it grow over 30 years to generate $800k a year ($20,000,000) in retirement. Point being, high tax bracket employees are still very likely better off saving in a tax deductible and tax deferred manner compared to the recommendations put forward by the OP.
Edit: Forgot this part:
and it will almost surely be higher once one spouse dies
If you are already in a high or the highest tax bracket, the death of a spouse is unlikely to push you into an even higher one. That is of course different if you are in a lower or middle tier tax bracket. Using that $800k example, you are already in the top bracket. The death of a spouse isnāt going to make that any higher.
OMG, the horror. How will these poor people manage?
I would LOVE to see my retirement turn out this way. If having 7 figure income and paying a lot in taxes is the result of some wildly successful stock grants and real estate moves, sign me up!
Iām one of those āhigh-incomeā people, MFJ solidly in the 35% bracket. This advice to stop pre-tax contributions gets little or no traction with me. At peak career earnings, Iām still going to shield every dollar I can from taxes, while still trying to save more in non-tax-deferred accounts.
Iāll stop working long before I have enough assets to push me above the 24% tax bracket every year - currently thatās $360k+. And even with a marginal rate of 24%, assuming a very healthy retirement āincomeā of SS + investments spinning off $300k/year, the effective tax rate is likely to be below 20%. Why would I elect to pay an extra 35% today when thatās the retirement scenario Iām looking towards?
Am I missing something? Yes, I realize RMDs will force me to draw more over time, and the math will change. But income has to go through the roof to get to a 35% effective rate.
Yes, I definitely agree that a couple with $400k income that has only saved an additional $200k outside of IRA/401k over a 30 year career is better off saving in tax deductible accounts. Because they arenāt going to retire at the level theyāve gotten used to living. That is, if they ever retire at all.
Pushing into a higher tax bracket is only one of the issues of going from MFJ to Single. Arguably, the bigger issue is that MUCH more of the income will be taxed within that higher bracket. For example, MFJ taxable income $240k, only $50k of that is taxed at the 24% rate. But suddenly turn single? Single taxable income $240k, $145k of that is taxed at the 24% rate (now it is true that currently thereās a 22% bracket just under it, and 22 is almost the same as 24, so it doesnāt matter much, but when tax law reverts in 2026, itāll be a wider difference as I recall).
If youāre solidly in the 35% bracket, you definitely should still contribute pre-tax whenever possible. Max out that 401k each year! Itās not likely that when you withdraw, letās say after age 70-something (RMDs), that you will be paying 35%. And even if your marginal rate is 35% in some years, not ALL the money being withdrawn will be taxed at that marginal rate, some of it will be taxed at lower rates as you traverse the brackets. But ALL the contributions today will save you 35% up front (because āsolidly into the 35% bracketā).
Absolutely. And my wife is self-employed, so sheās able to do profit sharing into her solo 401k. This year weāre on track for about $85k total across elective deferrals, profit sharing, and match from my W2 employer.
