How Should Most High Earning Accumulators Approach Retirement Savings?
Here’s how I’d approach it:
✅ 1. Strongly Consider Maxing Out Traditional Workplace Retirement Account Contributions
This reduces current taxable income, freeing up current funds for additional investments, and provides more flexibility later.
✅ 2. Use Extra Take-Home Pay to Increase Taxable Investments
Taxable brokerage accounts are not the enemy—especially if you’re investing in low-dividend domestic equities. You maintain liquidity, flexibility, and tax-efficient growth.
✅ 3. Great Opportunities in Retirement
Accumulators buiding up a combination of traditional retirement accounts, taxable accounts, and possibly Roth IRAs will have great opportunities through drawdown strategies and potential Roth conversions to limit total lifetime taxation and get great results in retirement.
But What If Tax Rates Go Up?
Sure, there’s a risk that Congress could raise taxes in the future. I believe that risk to be rather modest. Even if tax rates increase, taxable income tends to significantly decline in retirement, and America has progressive tax brackets. That combination, regardless of future tax hikes, means most people are likely see their income tax exposure decline in retirement. This is applies even more so for early retirees.
Plus, don’t forget the standard deduction—in 2025, that, prior to any tax law changes is $15,000 for singles and $30,000 for married couples, which means you can generate significant income in retirement prior to any of it being subject to federal income tax.