It's mainly pay the tax now or pay the tax later. But realize your spending matters too. You only pay 24% (or whatever) on the HIGHER portion of your income. If you know your withdrawals/income will be low in retirement, why not pay the 12% (assuming taxes don't change, yeah right but who knows) later?

I'm having a hard time putting into words what I mean. If you're not going to "fill up" the lower tax bracket in retirement (with your withdrawals), why not save on taxes (maybe 22% now) pay the lower taxes (12%) in retirement?

This post was edited on 1/30/18 at 9:14 am

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Posted by baldona

Florida

Member since Feb 2016

20514 posts

Posted on 1/30/18 at 9:33 am to jimbeam

quote:
If you're not going to "fill up" the lower tax bracket in retirement (with your withdrawals), why not save on taxes (maybe 22% now) pay the lower taxes (12%) in retirement?

Correct, advice is different for anyone that earns $150k or so plus most of their life and will need that much in retirement.

But for the average person that earns $80-120k ish or a little more you will likely pay very close to the same amount in taxes now or the future. I've heard taxes are 'going up' for 25 years yet they've not really changed.

Most of the people that talk about taxes going up are frankly not very good at business or finances, because most people that are delay taxes as much as possible. If you can delay paying 25% now for another 40 years there's basically no situation where that doesn't make sense.

Most people need less money in retirement too. No house payment, no retirement savings, etc. Removing just those 2 is generally 25-40% of someone's gross pay. That's a lot less money, and can easily drop your tax bracket considerably.

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