Retirement Planning - ROTH vs PRE-Tax 401k or Traditional IRA - when is it best to contribute
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- Опубліковано 15 лис 2024
- Should you invest & pay taxes now for your retirement planning - Roth IRA / Roth 401k OR should you get the tax deduction and invest in a PRE-TAX Traditional IRA or 401k? There are many opinions about investing in AFTER TAX retirement accounts vs PRE-TAX retirement accounts, but how many times have you thought about when is it BEST FOR YOU?
From my perspective, as a Florida resident that lives in a state with NO state income tax AND plans to remain a Florida resident - in a state with no state income tax - throughout our retirement years...I am a firm believer in maxing out your Roth IRA and/or Roth 401k.
However, if you currently live in a state that has a state income tax & you're in a high tax bracket & you plan to retire to a state that does NOT have a state income tax AND you plan to reduce your retirement lifestyle/expenses...then I believe you should contribute to your PRE TAX retirement accounts.
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I've been involved in people's financial decisions for 15+ years (7 yrs Real Estate experience & 8+ yrs as a former Financial Advisor)...I now bring the financial successes, mistakes, failures, and best financial habits/tips to you through these videos.
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@LeilaniClaire I will give this a look, thanks a bunch for sharing.
What I love about the Roth 401(k) is it can help you save on taxes in retirement. Not only are withdrawals tax-free at 59 1/2 , it won't impact the taxation of your Social Security benefit and Medicare premiums.This is an important aspect of a Roth account that most people are not aware of.
yes right now I prefer the Roth 401k! Because I am paying 19% in taxes on my Roth contributions. That is for state and federal combined.
This was very helpful. Thank you. I wasn’t taking into account that my employer is contributing pretax
I'm CA resident that has to pay 31 cents for every dollar contributed to Roth accounts. My strategy is to skip 401k Roth and max out 401k Traditional....take the tax savings from the deferral and contribute it into Roth IRA. In the end I will have two buckets and plan for Roth rollover events during down market years.
As someone trying to figure this out myself currently, I see your point and I have always thought that if the tax rate is higher at that time. However, money makes money, so theoretically if you have more tax deferred dollars to invest and build on, wouldn’t that yield a higher overall amount (assuming the market stays the course of a slow climb)..
I invest 50% of my contribution in my Roth 401k and 50% in my traditional 401k..
@ravishinghunk2671 - Any employer match/profit sharing by chance?
@@Financial_Awareness Yes, 5% of compensation..
@@ravishinghunk2671 - Nice...love to see that. My conviction leads me to believe 100% Roth for employee contributions, but that is merely an opinion...doesn't make it right. Love the 'hedge' approach you're taking as well because at the end of the day...you are still living below your means and saving $$$. It's not always about how much money we make that matters, but rather how much we keep. Appreciate you checking out the channel! Cheers!
@@Financial_Awareness Thank you.. I do it as a hedge to give me flexibility..
@ravishinghunk2671 - Dude, so smart!
In the vid I mentioned that folks in state-tax states should do more or all pre tax if they plan to liquidate their accounts (during retirement years) at a lower income/tax bracket than they are paying now…does that sound logical to you or do you think just “in general” folks should hedge with some Roth contributions?
Should it my company match 6% should I put 6% too ?
I’m still confuse in this. But I put Roth now for my 41k.
So let me ask you this: isn't one of the benefits of the pre-tax 401k (besides tax-deferment) is that you then get to take those tax monies saved and use those in order to create a larger 401k balance, thus creating a compounding effect even faster? It's like using the money that the government is going to get in order to make yourself some extra money.
I don't think i care about how much tax that i payl i care more about how much money i would get at the end. If you can pay the tax now, you can also invest those money as well. So the math is not that easy.
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