Why Should I Choose A Roth 401(k) Over Traditional?
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- Опубліковано 31 сер 2019
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So he accounts for the taxes taken out at retirement for traditional 401k but completely disregards the taxes being taken out each week funding a Roth 401k. Of course a Roth sounds better if you use that extreme over simplification.
He totally ignores the taxes paid before contributing to the Roth.
I’m so glad I found Dave at 13 😂
I have two pensions. I would much rather have had a Roth 401k throughout my working lifetime. $500/month invested from 25 - 65 at 9% is $2.3mil. I have $100k that i like to invest in a non-retirement account, Where would you invest this as of now?
I converted to a Roth 401k. I plan on living off my dividends tax-free. People are way too comfortable with low taxes & low interest rates today. Trump's tax cut expires in 2025. Fed's low interest rates has skyrocketed debt all across the board. Social security is heading for insolvency. Country is 22 trillion in debt. TAXES WILL GO UP IN THE FUTURE ! When you withdraw income from your retirement accounts, you will be taxed by the IRS unless you have a ROTH. So pay low taxes now or pay high taxes later ? No disrespect but I think those people are delusional if they believe taxes will not go up in the future
While your 401k and IRA account would likely continue to grow even after you stop contributing to it, that growth might be limited by the Market, your personal plans and also other factors. For this I see need for annuities. I still will like to know how to compound $2m and above in retirement without holding cash.
investment requires good experience and knowledge to carry out a good and successful trade, I have lost a lot trying to trade all by myself May I ask which investments are good? I've been looking at a few different ones but want others' opinions as well.
I wish he asked him his income. Roth is better if you aren't in a high income tax bracket and 401k is better if you're trying to lower your taxable income.
Biggest financial mistake I ever made was with my 401k. My company had a Roth 401k when my kids were in college, but I didn't actually start contributing until year 3 of the 6 years I had kids in college. Because I was helping them with expenses, I was entitled to the tax credits, so my effective tax rate was extremely low. That is the time you NEED to be in a roth! i still retired with about $350k in my 401k.
I was advised to diversify my portfolio among several assets such as stocks and bonds since this can protect my portfolio for retirement. I'm seeking to invest $200K across markets but don't know where to start.
This is financial advice and I never give financial advice: DONT LEAVE DURING THE BEAR. If you don’t want to invest…learn. If you don’t want to learn…build. If you don’t want to build observe. DO SOMETHING…other than leave. There is so much opportunity here. Take advantage!
I would like to take a moment to appreciate how polite and respectful Fernando from Texas is.
A Financial Planner told me Saving at least 15% of your income in a 401(k) can help ensure that you have enough money to retire comfortably. How can one take advantage of compound interest and potentially grow your retirement savings/net-worth to about $3M over time?
My biggest mistake was procrastinating and not starting one as soon as I was eligible. It's really not that hard to open an account and manage yourself. And you can also have your brokerage manage it for you. If you're reading this, start now.
I just turned 29, and I currently have $18,800 in my Roth 401k and $12,500 in my Roth IRA. Starting off slow but can't wait to see the compounding.
That GROWTH tax-free is absolutely a GAME-CHANGER.
Schools: What would you like to study this year?
the only mathematical difference between the Roth and Traditional is the expected tax rate. if you think taxes will be higher in the future you should pay now and use roth IRA. if you think tax rates will decrease in the future you would be better off waiting to pay and pay when you pull the money out of the traditional. Dave's example is a bit disingenuous as he is framing it as if it's as simple as saying do you want 400K more or less. The honest reality is if you make 100K a year with 20% tax rate and contributing 10%. using arbitrary numbers for easy math. If you put the 10% into a traditional you put 10K in and are taxed on only 90K income, thus paying 18,000 in taxes leaving you with 72K after tax income. If you contribute to 10% to a roth IRA its after taxes. so you will be taxed on 100K income, pay taxes of 20K and have after tax income of 80K. but then 10% of that is 8K contribution. leaving you with the same 72K disposable income. but you only contributed 8K on an after tax basis. not 10K in the traditional IRA example. technically for Daves example to be accurate of getting this after tax higher amount he discussed. you would have to contribute the same 10K as you would in the traditional example; however your left with less disposable income every year of 70K.
The thing that overlooked is that the tax on the final amount is less than the growth received from investing money you wouldn't have had. Let's say taxes are 10%. You can invest 500/month in post tax dollars or invest the 500 plus the 50 you would have paid in tax into a 401k. The growth of that extra 50 a month is much much larger than the additional taxes even if you are in a much higher tax bracket at retirement (and even if tax rates rise throughout your working years). The only way it sort of makes sense is if you assume people will magically spend the extra 50 rather than investing it or even using it to pay debt or save.
Deciding between a traditional and roth has 100% to do with your tax rate now vs retirement. If you believe your tax rate will be more in retirement, do a roth. If you believe you will have a lower tax rate in retirement, go traditional. It's that simple. One does not yield more than the other if the tax rate is consistent. I personally do a traditional.