Roth IRA vs 401k - How To Retire With MORE
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- Опубліковано 22 вер 2024
- The Roth IRA is a great investment account, but is a traditional pre-tax 401k the better choice? I'll run through the numbers and show which account gives you the most spending power for your retirement. The results may surprise you!
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I didn’t have a choice my first decade, only traditional was offered. Did get better with finances and shifted to getting company match, maxing Roth IRA, and then go back to funding Trad 401k. Could be an interesting video to discuss Trad 401k balances that are run away trains w/eventual RMDs, to the dilemma of contributing to Roth 401k with higher salaries/tax rates during peak earning years.
So I prioritized the pre-tax 401K for the first 25 years and plan switch to ROTH for the next ten years and I did so for 2022 and 2023. In addition I did contribute to my ROTH IRA when I could and will continue to do the backdoor also for the next ten years. My pre-tax bucket is 10x my ROTH and unlikely to catch up due to 55 years being my cut off but I want to increase my amount in there. In addition my husband's income should continue to increase so with the uncertainty around taxes this seems to be the most logical strategy for us.
Sounds like you two will be set no matter what, great job!
The US is 32 trillion in debt, taxes are definitely going up. Invest in the roth
Very well done.
Thanks, much appreciated!
Great video Jay.
Thanks! I appreciate it!
Two issues. 1. You used the graph that shows the tax brackets they are in but not what they would actually pay. You should have pulled up the doc from the irs gov website and showed what they would have actually paid for your example. 2. You are not assuming the most important fact. Tax's always go up, so promise me the tax I pay now is going to be cheaper 25 years from now with out the tax codes changing. You are taking more risk not paying now.
What you'd actually pay in the Roth scenario is your top tax rate. Whatever that works out to be., that's the point.
And tax rates have gone down over time, not up. www.taxpolicycenter.org/statistics/historical-average-federal-tax-rates-all-households
One issue I’ve never seen addressed by any financial UA-camr is this; tax issues wether pretax or post tax are always assumed to be written in stone and they most certainly are not. When I receive a tax break today because I contribute to my 401k I already know I will be taxed at distribution. The problem is, the tax benefits “promised “ in the future are only theoretical. That’s the law on the books today. As we know our national debt problem is only going to get worse and future congresses will be searching for ever more onerous and draconian measures to raise more revenue, who’s to say they wont change tax law and tax Roth IRA and Roth 401k withdrawals ? Double taxation, you say ? Yes , and your point? Better to take the tax benefit today than count on a “promised” tax benefit at some point years into the future IMHO
You have to use the current tax rules because they're the only solid information to work with, otherwise you're just making things up. Roth rules could change in the future, yes. But I wouldn't make any financial decisions based on what congress maybe might do sometime in the near or distant future