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Started by zbrown22, September 09, 2018, 05:57:44 PM
Quote from: zbrown22 on September 09, 2018, 05:57:44 PMWhat is the general consensus on Roth vs Traditional 401k? Much of the conversation I read online surrounds ones marginal taxation rate, and what that will be now (i.e. working years) vs what that will be in retirement. Generally, I expect lower, but taxation is not the only consideration (at least for me) when selecting the type of retirement contributions.How do you factor in generational wealth considerations (i.e. inheritance of retirement account money)? And how about RMDs? (I know Roth 401k has RMDs, but these can be eliminated by converting to a Roth IRA once leaving ones company and beginning retirement).
Quote from: YoungAndTheInvested on September 14, 2018, 08:54:10 AMRegardless of the account you choose, maxing out your available contributions annually is smart. Both have their advantages and disadvantages. Some other items to note regarding the benefits of contributing to a Roth IRA:The ability to watch your money grow tax free for longer. Traditional IRAs require you to take required minimum distributions (RMDs) every year once you reach age 70 ½, regardless of your need for the money. The government never received tax revenue from those funds when you contributed them and wants to get what it's due at some point. RMDs accomplish this goal. With a Roth IRA, you paid your taxes upfront and you can ignore these RMDs. Your money can stay in the account and continue growing tax-free.An additional benefit is leaving a tax-free inheritance to your heirs. What do I mean by that? The people who stand to inherit your Roth IRA when you land that great gig in the sky won't have to pay any federal income tax on withdrawals so long as the account has been open for at least 5 years. While you might not get to enjoy this benefit, your heirs will certainly appreciate it.And finally, you are able to take out contributions made to the Roth IRA should a present need arise without a tax hit.
Quote from: numbers on September 15, 2018, 06:09:46 PMSeems to me, those registered on this site should not expect their tax rate to decline in retirement. If you're a saver, especially a young one, it should be relatively easy to have the same income in retirement as when working, and when RMD's start you will probably be reporting more annual income than was earned while working. Tax rates are not going down, someone has to pay the Government debt.