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Roth or Traditional 401k

Started by zbrown22, September 09, 2018, 05:57:44 PM

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Cheezus

I'm going to disagree with Sam on this one, kind of.  If you are in a very high tax bracket, then it may make sense to go traditional and take the tax break now, since you'll be pulling at a lower income in retirement (most likely) and pay a lower tax rate on your distributions.

However, if you think it's likely taxes will be lower in 40 years....  I don't know what to tell ya!  The country is (unfortunately in my opinion) going to continue moving left, more entitlements, single payer healthcare, etc.  Just like Europe.  All that will come with higher taxes, much higher taxes.  If I qualified for a Roth, I would do a Roth.

Of course, there could also be exemptions to high taxes for retirement distributions....  Ultimately, it's truly a gamble on what you think the future holds.  I do like the concept of "don't give the government the money until you have to" - but I also think it's highly unlikely taxes will be favorable come retirement time.


deific

I believe you should be tax diversified with retirement accounts. Near the beginning of my career they came out with Roth 401k and that is what I utilized. Now married I don't see the tax benefit of using a Roth 401k. Additionally, I have a lack of trust in our government. If I have avoided $1,000,000 in capital gains taxes on my roth 401k, I have to believe they are going to figure a way to capture that. Meanwhile if I contribute to a traditional I can continue to find a way to avoid those taxes in the future.