[quote=scaredyclassic]But it’s not worth deferring taxes if taxes get much higher later right?[/quote]
Depending how much you have done prior to retiring, the actual tax rate may not matter if you derive the bulk of your income from other means. Also, if you have other funds to live off of.
That being the case, it’s probably always better to defer since when you are working, you are always at your marginal (highest) tax bracket so you defer as much as you can during the working years.
If you’re a young worker without a pension (most people now), then you will have a situation where if you do decide to retire early, you can start withdrawing retirement assets tax free or very low rates if you have enough tax deductions to balance your tax due on the withdrawal (deductions aren’t credits so you need to have some form of income to use them).
You may also have periods in your life where you take time off, are laid off, change careers and start a business where you aren’t making much at all.
I’ve been in nearly all those situations and I’ve mentioned before I pay very low taxes now since my income is sadly, very low. That being the case and also when I took time off, I did IRA conversions as well and know of a friend who is “retired” with no earned income so he can do withdrawals at low tax rates or even free…even though he’s a millionaire.
This is why I tend to not favor Roth 401(k)s since you can control your income in the future if you aren’t super wealthy or have a pension.
