Contributing to Roth 401(k) accounts at peak earnings may result in overpaying taxes if retirement tax rates fall below current brackets.
High earners in the 24% federal tax bracket who max out Roth 401(k) contributions may face unnecessary tax costs. Withdrawals in retirement at 12% or 22% rates mean pre-paying taxes at their highest-ever rate, reducing long-term savings efficiency.
For married couples, provisional income between $32,000 and $44,000 can make up to 85% of Social Security benefits taxable. Required minimum distributions from large traditional accounts further complicate tax planning, potentially pushing retirees into higher brackets.
Balancing pretax and Roth contributions allows retirees to convert funds at lower tax rates during gap years between retirement and RMDs, while managing Medicare surcharges.