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Quick qstn - I'm receiving HRA of 24075 from my employer but I would like dhow the rent paid as 96k p.a (while filing ITR). Even if I do so, I was only able to get exemption of 24075 from gross. Checking if we can speak to payroll department to increase Actual HRA since I'm actually paying more rent than compared. Will I be able to do so ?Deloitte Newco EY Accenture Genpact KPMG
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Chief
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The way i see it, it comes down to whether you think taxes will be lower or higher in the future. Unfortunately, I have a feeling taxes will only go up, so I decided to do a roth 401k and pay my taxes now!
Can I do like a retail job in my last year of career to being down my tax rate? I’d love to work at Trader Joe’s 😀
Pro
Pay tax now = Lock in your tax rate
Clever when you end up making more money later in life, but have already paid the tax rate for someone making much less
Pay tax later = Defer paying taxes until later on, meaning whatever tax rate you have at that time will apply
Post tax definitely. Early in your career you are in a lower tax bracket and you have 30+ years of compounding returns. That leaves you with a big, tax free income stream in retirement. If you can max it now you’ll thank yourself later
I was talking Roth.
Does your company have a 401k match? If so, definitely contribute pre-tax and get that match. I also have a Roth but most of my contributions right now are to my 401k so I can get the most out of the company match, and it also helps lower my taxable income.
Ok this may sound dumb, but I did not realize my company offered a Roth 401k until today and am now in the process of converting to it. So thank you for your post haha
Too broad a question to accurately answer without more info.
Compare your current marginal tax rate to your effective rate on what you spend in retirement.
Gotcha thank you! Makes a lot of sense. And yeah I also max my Roth IRA. I’ll switch it to pre tax now. Thank you.
I think a non-Roth post tax 401k is the worst of both worlds. You get no deduction upon contribution and the earnings are also taxed at withdrawal. Terrible option
SM1 is correct. Ask PwC to offer a Roth 401-k. That way you don’t get taxed at withdrawals in the future
Chief
Pretax. The older you get and the larger the income, the lower your tax burden gets (unless you stay salary class your whole life)
I did pretax. The compounding of the extra money you are able to save by not paying taxes now probably outweighs the extra taxes you might pay later.