All of your investment growth is tax free. That's at LEAST 10% extra return for 'free'.
Boom!
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All of your investment growth is tax free. That's at LEAST 10% extra return for 'free'.
If I have many many years before retirement and I'm just starting out and I have to pick one or the other, I'd go with the Roth. Reason being, over a few decades, your growth will very highly exceed your actual investment. If you invest a few hundred thousand over your lifetime, you can see several hundred thousand in growth, and every bit of it is tax free. (upon withdrawal at retirement)
All of your investment growth is tax free. That's at LEAST 10% extra return for 'free'.
Why are you thinking age makes a difference? ALWAYS do the Roth first (assuming you qualify, it has income limitations). TAX FREE GROWTH is tax free regardless of how close or far you are from retirement.That was my understanding. If I was starting out and had a long time to go, then yes, I would want do contribute after tax.
But if I am older, wouldn't I want to go the traditional route (pretax), that way I was putting in more, and have more to invest with?
I am not doubting you guys, as I understand the theory. I am legitimately interested in what age or at what point would a person do one or the other. If I have 20 years to go, would you do traditional 401k vs Roth? I am able to max mine out at the moment and have the option of doing both at work.
The way this country seems to be heading? I'd max my Roth first.
That was my understanding. If I was starting out and had a long time to go, then yes, I would want do contribute after tax.
But if I am older, wouldn't I want to go the traditional route (pretax), that way I was putting in more, and have more to invest with?
I am not doubting you guys, as I understand the theory. I am legitimately interested in what age or at what point would a person do one or the other. If I have 20 years to go, would you do traditional 401k vs Roth? I am able to max mine out at the moment and have the option of doing both at work.
OP's company has NO match.I've heard the pros & cons of both:
401k(pre-tax), tax saving now(bird in the hand)
-- most likely you'll make more while working, dropping your overall effective tax rate
-- most likely withdraw less in retirement, lower tax rate
ROTH IRA, post tax, all tax free in retirement, under the current rules
-- what if they change the rules(2 in the bush)
I recommend, 401k over Roth.
If some day you max the 401k, then fund a Roth.
OP's company has NO match.
Do you get a company match on either?
There is no math that makes putting in pre-tax money smarter than getting free tax growth first. More than likely his current tax rate isn't changing even if he is at the cusp of a higher tax rate, tax rates aren't retroactive, they are incremental. But having more taxable income during retirement very well may affect his rate upwardly when most can least afford it. (Depending on which state he lives in of course)It's still pre-tax contribution lowing his tax rate.
If you contribute $100/wk your take home pay will only go down by approx $85 bucks.
Doesn't hurt as bad as saving post tax money in the bank and then sending a $3000-6000 check to your ROTH acct.