Sean Mullaney

And it turns out that for the vast, vast, vast majority of Americans, I would contend even for the vast majority of affluent Americans, it turns out you pay more tax when you're working and you're getting up in the morning to generate taxable income than when you're retired.

And so let's think about that for a second.

You've got that Roth 401k or traditional deductible 401k at work.

You get to deduct into that thing at your highest marginal rate.

Maybe it's 22 percent.

Maybe it's 24 percent.

Maybe it's 32 percent.

So that's an immediate tax break.

benefit of 22 cents on the dollar, 24 cents on the dollar, 32 cents on the dollar.

Okay.

Well, what's that going to look like when it comes back into income later on in your retirement?

Well, you have that run back up the progressive tax brackets.

Now, particularly for the early retiree, the 60s could be a great time to maybe get some of that money and either Roth convert it in your 60s or just live off of it in your 60s

And some of it will be sheltered by the standard deduction.

I refer to that as the hidden Roth IRA.

We took money from a retirement account and we didn't pay federal income tax.

Isn't that a Roth IRA?

Well, not in this case.

That's what I refer to as a hidden Roth IRA.

It's a Roth IRA that lurks, that hides inside your 401k.