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Not true about tax brackets. Depends more on what you're investing in. Let's say you invest in equities and in the next 30 years those funds appreciate 1,000%. If you had Roth IRA you pay zero taxes on that gain. Normal IRA you're taxed on the entire gain when you withdraw. That's a big difference.
It depends on how much those pre tax dollars appreciate before retirement. No one can really calculate this hypothetical number. Roth if your tax rate will be hire later, otherwise leave those untaxed dollars working for you
Thanks for the answer. Hope uncle donald will lower the tax rates soon ✌
I think that's something we can all agree on. Taxes are too damn high.
Op said 401k. The 132k limit is for ROTH IRA's
^Yes really
Split it 50/50. Tax diversification
Roth if under 132k.
If it's over 132k you can still get in a Roth..just backdoor it
If you invest 1000 pre tax and make 1000% gain then pay 35% tax. You end up with the same amount if you first paid tax on the 1000 and invested 750 post tax and made 1000% gain.
Nobody here is in the 35% bracket. Unless you're a partner.
Also assuming that you're successful in your career, you're likely to be in a high tax bracket when you retire since you'll be pulling out all this money you've accumulated.
I never once mentioned partner pension considering most on here will never see that. And if I say rate do you now feel better. Yes bracket ranges will change and tax rates will change.
The point is it all comes down to the rate you are being taxed at now vs retirement and giving yourself options.
So OP the answer to your question is Both.
Jesus Christ ...I used to work for the IRS and you guys are making my brain hurt lol....I feel like I should hit you guys up for some tax planning this year Since it will be the highest income for me this year and will only get higher.
How much money do you make?
Good catch
Depends where you estimate your tax bracket once retiring also.
If you remained in the same bracket the net effect is actually identical.
That would be assuming tax rates don't change at all, which is unlikely
Right. It's all about how much tax you are currently paying vs how much you'll be paying at retirement. Most people assume they will rerequire less income and therefore taxed in a lower bracket and rate but if taxes skyrocket or you increase your bracket then it's better to pay those taxes now. For most though a traditional is better due to the lower income needed once retired.