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re: Company doesn't offer any retirement benefits, what to do?
Posted on 8/21/13 at 11:35 am to theBeard
Posted on 8/21/13 at 11:35 am to theBeard
quote:
Its not a pre tax option but why not a Roth IRA and catch the tax break on the withdrawal when you are being taxed in a higher tax bracket?
The downside of this is that you'll get less bang for your buck since you are investing taxed income. Isn't building as fast as possible to realize the benefits of compounded interests especially important for young people?
In this situation, I'd put a given % in a traditional IRA, and any leftover savings go into a Roth, which has the benefit of tax and penalty free withdrawals of contributions in the event of a catastrophic emergency.
This post was edited on 8/21/13 at 11:38 am
1
Posted on 8/21/13 at 1:24 pm to dewster
quote:
The downside of this is that you'll get less bang for your buck since you are investing taxed income. Isn't building as fast as possible to realize the benefits of compounded interests especially important for young people?
The tax rate is the tax rate, regardless of if it's taken now or then. You can do the math...given the same tax rate and growth rate it works out to be the same.
You can just as easily say that it's better to do a Roth if you are young because it means compound interest can grow completely tax free.
If there is any games with inputs with the same tax rate, 5000 after tax is obviously worth a lot more than 5000 pre tax so if you are maxing your contribution that is a consideration even if you don't think taxes are going up for you in the future.
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