<2> Is it Time to Rethink the Myth of Tapping Your Roth Last?
Understanding the Conventional Wisdom
The conventional wisdom among financial planners and experts has long been that it’s best to tap your Roth IRA last, after exhausting your 401(k) and other traditional retirement accounts. This advice is often based on the idea that Roth IRAs are funded with after-tax dollars, making them more accessible to taxes and penalties when withdrawn.
The Problem with this Advice
However, this advice may not be as clear-cut as it seems. In reality, the tax implications of tapping your Roth IRA versus your 401(k) and other traditional retirement accounts can be more complex than a simple last-in, first-out approach.
The Importance of Considering Your Individual Circumstances
When it comes to deciding which retirement account to tap first, it’s essential to consider your individual circumstances. This includes your income level, tax bracket, and financial goals. For example, if you’re in a high tax bracket and expect to be in a lower tax bracket in retirement, it may make sense to tap your 401(k) and other traditional retirement accounts first, as you’ll be paying taxes at a lower