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Depends on what your current marginal tax rate on those dollars is versus what you expect your marginal rate to be in retirement.
Most people think tax rates will generally go up though, making the Roth an attractive choice.
D1 - I will be retiring with more money coming out of deferred accounts at a 4% withdrawal rate than I make working. Plus I believe tax rates on Fed side will be higher. By investing in Roth now at age 60, I am reducing RMDs at age 70. This is my rationale.
Roth 401k all the way. Most definitely when you are in your 20’s. Each $$ you put in now will be worth 10x that in retirement. Compounding interest is an amazing thing.
There are some people that say it does not make a difference because you were saving on your taxes today. There are so few people that would actually invest that savings to make that argument hold water. Plus, your income later in the life will be much higher than it is today and you will be paying more taxes then too.
I am sure your matching is going into a traditional 401k too so you will have leverage on your accounts in retirement.
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Associate 1 is correct.
Additionally, 401k is available via a Roth conversion ladder. Very significant opportunity
I have more than enough in Roth and the tax deduction now is more valuable to me than a tax benefit to my heirs*
No children, so heirs are charity and nieces/nephews.
For what it’s worth, I started out the year planning to max out our Roth 401ks. However, I looked at our tax planning mid-year and realized I made a terrible mistake that will cost us thousands in tax credits because we could’ve had lower MAGI if I’d done traditional 401k all year. Lower MAGI means we would have qualified for more of the adoption tax credit that we have coming. So - typically, yes, Roth 401k. But if you have special tax credits that you want to take advantage of, make sure that doing Roth vs pre-tax doesn’t put you over income limits.
Thanks! And that’s awesome. I’m an adoptee myself - it’s been very interesting to go through this process on the other side
Yeah that’s my thought, I also just look at it like I know my current tax rate and have no idea what taxes might look like in 33 years (I’m 27). Seems riskier to hope that tax rates don’t increase down the line