Dear Dr. Don,
It looks like retiring workers who invested pretax dollars in their retirement accounts and who need to tap the 401(k)/IRA for income will probably pay more in taxes than they avoided by investing with pretax dollars.
What is the best strategy for people still working? For example, should they invest no more in their 401(k) than the employer match in pretax dollars?
-- Michael Morass
That's an interesting question. Conventional wisdom has you investing pretax dollars in IRA and 401(k) accounts, then later taking qualified distributions from these accounts. At that time, you'd pay taxes on the distributions at ordinary income rates expected to be lower in retirement.