Blues Man
Diamond Member
- Aug 28, 2016
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Roth’s are only beneficial in certain circumstances. Specifically, when your tax rate at retirement is higher than your tax rate when you earn the money. If your tax rate were to be equal throughout your entire life, there is zero difference.For this reason the only retirement vehicle worth using is a Roth 401 where you pay the tax on your contribution which is very little for most people but ALL the gains are TAX FREE so your money goes farther
The vast majority of people are going to pay lower tax rates at retirement since their income will almost certainly be lower. That’s obviously not true for everyone.
The more accurate way to look at a 401k is that it avoids capital gains entirely and that’s true whether it’s a traditional or a Roth 401k.
The only way a traditional 401 beats capital gains taxes is if you want to live on less than 41K a year.
A Roth is always the best choice because the largest part of your retirement savings portfolio is tax free