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Message
re: I don't understand the love for Roth IRAs
Posted on 3/26/23 at 7:20 pm to thelawnwranglers
Posted on 3/26/23 at 7:20 pm to thelawnwranglers
The big driver is fear of assumed future tax increases. While that could be the case, making a decision on what you think tax rates will be in retirement is not a wise way to make a decision today.
The fear-mongering on my local radio station about the death knoll of future tax rates makes me want to puke because it preys on the ignorant or simply uninformed.
Tax-diversification is essential. So both/and is a great answer. If I have a client making $1.5 million a year, though, I'm never going to recommend they prioritize a Roth option when he/she could get a tax deduction in a traditional 401k.
ETA: Consider, too, a taxpayer in the 32% bracket now then 12% in retirement. Even for folks who believe tax rates will go up, I would be willing to bet most of them don't think a retiree's tax bracket is going to increase 20%. Yes - it absolutely could. Likely? No. Certainly not likely enough to bypass a tax deduction today.
The fear-mongering on my local radio station about the death knoll of future tax rates makes me want to puke because it preys on the ignorant or simply uninformed.
Tax-diversification is essential. So both/and is a great answer. If I have a client making $1.5 million a year, though, I'm never going to recommend they prioritize a Roth option when he/she could get a tax deduction in a traditional 401k.
ETA: Consider, too, a taxpayer in the 32% bracket now then 12% in retirement. Even for folks who believe tax rates will go up, I would be willing to bet most of them don't think a retiree's tax bracket is going to increase 20%. Yes - it absolutely could. Likely? No. Certainly not likely enough to bypass a tax deduction today.
This post was edited on 3/26/23 at 7:23 pm
2
Posted on 3/26/23 at 9:08 pm to Niner
quote:
Consider, too, a taxpayer in the 32% bracket now then 12% in retirement.
Bruh, you saying you can name one couple making $30k a month now that’s gonna be cool living on 6k a month in retirement?
Let’s say they spend 7k a month… that’s 22% and only a 10% spread. Which, by the way, would have been 25% just a few years ago… so let’s call it a 7% spread. See where I’m going with this yet? Now add the 50T in debt in the proposed budget from like a week ago.
All good I guess.
Posted on 3/27/23 at 4:21 pm to Niner
quote:
Consider, too, a taxpayer in the 32% bracket now then 12% in retirement. Even for folks who believe tax rates will go up, I would be willing to bet most of them don't think a retiree's tax bracket is going to increase 20%. Yes - it absolutely could. Likely? No. Certainly not likely enough to bypass a tax deduction today.
This is decent statistical analysis, for sure, but we have to assume this is as low as rates will be for the next 25 to 30 years. And they could rise sharply, especially for the upper middle class. I'm fine paying the taxes today. I project quite a bit of passive income in retirement, so I want to keep what comes out of my 401k as low tax as possible. If there is some "bipartisan" tax bill that bumps rates up, I'll reconsider some of my Roth contributions at that time.
I may be older than some of you baws, but I can remember (at least as a kid/teenager) marginal rates of 70%.
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