The Importance of Marginal Tax Rates in Retirement Planning

We published an article in late September, Pay Attention to Marginal Tax Rates and Not Tax Brackets, that highlighted how the analytic framework for providing retirement income planning advice can be improved.  It focused on three decisions that investors sometimes need to make: (1) whether to convert funds this year from a tax-deferred account (TDA), like a 401(k), to a Roth account; (2) whether to contribute this year to a TDA or a Roth account; and (3) how to tax-efficiently withdraw funds in retirement, where withdraw is interpreted broadly to include Roth conversions.  The author of that article is with me today to discuss how advisors should approach those decisions.