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Guys, TCS has deducted around 650 rupees from my feb salary under the head health insurance premium, even though I haven’t opted for parents premium or upgraded my coverage. Has anyone here encountered the same scenario? Some say that they deduct tax for premium like that.. I am confused. Could you please throw some light in this matter? Tata consultancy sevices
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If you are over the income limit and do not qualify for free income tax filings for your 2021 tax return, TurboTax is on sale at certain retailers (Sam’s Club, Target, Costco and a few others) during the month of January. The discount is better than getting it directly from turbotax.com. I was able to get the Premier option at Sam’s Club for $55 for five electronic federal filings and one state return.
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No. If you look at the math between traditional and Roth (check out some of the bogleheads.org threads), traditional comes out on top most of the time, unless you're in a low tax bracket.
Your question was addressed as well, that there is a risk of rising tax rates. Basically they looked all through history and said even the largest raise in taxes has barely changed the overall strategy (they did some hypothetical scenarios as well). Of course, maybe something very drastic happens in the future that we've never seen, but all we can do is base our decisions on what we know now. Like if one day the government decides Roth is going to be taxed, that invalidates everything we knew up to that point (not saying this will happen, just an example).
Once you're in a high tax bracket (in comparison to your estimated bracket during retirement), it makes sense to go all traditional 401k. You're still using your Roth IRA through a backdoor Roth (unless that goes away) so you have that portion as a hedge. If the backdoor went away, you may want to put some of your 401k contributions towards Roth 401k as a hedge, since we don't know the future.
Who knows? Depends on how they increase taxes. What if they implement some flat tax? That would make traditional way better now. Probably not likely. I would just focus on what bracket you are in now. If fairly low, I would do Roth and if high, traditional. Maybe just easier to split for now
Taxes may increase, brackets will also increase. Nobody knows. If you are in a low marginal tax bracket then go Roth and vice versa. If you are not sure then split contributions into traditional and Roth, keeping in mind that you can get some investments into Roth using backdoor and mega backdoor Roth routes as well.
It’s a bit more complicated, and a good bit about your interim plan and coverage needs:
- traditional: taxes will be lower in the future, maybe even $0, bc you you can do a Roth conversion ladder if you retire early. Downside is that there’s going to be RMDs, so if you don’t convert it all or need thanks to other income (pension or SS income is enough), you’ll still have to take it for taxes
- Roth: pay all the taxes up front, but you have full control over when you withdraw, so it becomes an inheritance vehicle, even. Because there’s no forced withdrawal, the money grows tax free much longer. If you may never need the funds and can’t run a conversion ladder, this could be the way to go. I’ve found that most calculators only account for value at retirement, and not value over the spans of your life from retirement to death, accounting for RMDs that may be bigger than you’d need.
You can always put the extra $ into a brokerage, but that’d still be taxable at time of the RMD. (Though it’d get step up advantages on inheritance.)
The issue isn't so much about tax rates increasing as much as if tax breaks/dodges go away. A reasonable school of thought is why guarantee a tax payment now when there may be so many ways to shelter that income from taxation in the future?
My personal thought is that people should open a Roth IRA while young, especially if theh plan to make more money than the roth income cap in the not too distant future. 5 years worth of roth IRA investment before you made too much money is more likely to help your retirement prospects, not harm them.
(Not financial advice disclaimer. Dyor)
Sorry to steal your post OP, but if I am making $145k, should I do Roth 401k or Traditional 401k? I am confused on which one to contribute to.
When you contribute to traditional you get a tax deduction. You don’t for Roth. You should take the money you save on taxes an invest it. If you are not maxing the 401k, you should put more in for traditional than Roth. Say you are in the 25% bracket, if there actually was one. If you put 10k in for Roth, you could put 13,333 in for traditional and have the same after tax income due to the deduction. So that traditional balance would be higher by a third when you go to withdraw. That extra balance will pay for the taxes you pay in traditional.
Personally I prefer to have as much tax free income in retirement as possible, even if that’s not what the expert analysis would say. People will run numbers and tell you what you should do, but at the end of the day we don’t know what rates will be or what our expenses will be etc. My dad is not in the highest tax bracket and he pays more and more taxes every year on his retirement income as his RMD goes up more and more each year. He wishes he had more tax free income due to all the taxes he’s paying. your RMD goes up each year per the formula and I think It also increases as your gains increase. But then I am one of those people that prefers to have a refund each year as opposed to a balance due…