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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
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