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Started by david123, November 29, 2018, 05:56:38 AM
Quote from: david123 on November 29, 2018, 05:56:38 AMI think a lot of people don't understand ROTH IRAs, even financial professionals. I've seen a lot of people make the argument about pre-tax vs post-tax, and will taxes be higher in the future or now.... and to all those arguments, I say "I don't care". My situation is that both me and my wife work. We max out our 401Ks every year (pre-tax money, but when we retire and begin to withdraw it will be taxed as ordinary income).We make over the limit to contribute to a ROTH IRA, so we do backdoor conversions to the max allowed ($5,500 each in 2018). It is post-tax money, but when we retire the withdraws are tax free. Why is this good? We've already taken advantage of all the pre-tax investing (401Ks) we can, so the ROTHs are the next best thing from a tax advantage standpoint. The ROTHs won't amount to all that much in retirement given the low yearly limits, but tax free withdraws might let me leave my other investments to increase for a few years.Any thoughts, or am I wrong in any of this?
Quote from: mbb_boy on November 30, 2018, 02:11:36 PMWhat people actually misunderstand is that when they discuss taxes now vs in the future, they should be comparing marginal rate now vs EFFECTIVE rate in the future. They often due marginal vs marginal, which incorrectly results in a Roth bias. I submit that default for everyone should be traditional, because scenarios where your future effective rate is higher than your current marginal are limited.