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re: Roth or traditional 401k?
Posted on 1/10/20 at 1:40 pm to tigerlife00
Posted on 1/10/20 at 1:40 pm to tigerlife00
The benefit of pretax contributions is that your income taxation is deferred until you withdraw from the account at retirement, a time when most people will fall into a lower tax bracket than when they were working.
The benefit of after tax contributions is that, because withdrawals are not taxed, the growth accumulated in excess of your contributions is effectively tax free. Typically over the course of 20 - 30 years, growth will exceed your contributions significantly, so it can be a big advantage.
I agree with the two posters above - if you truly intend on retiring in 6-7 years and anticipate that significant of a drop in income, I would continue to contribute on a traditional/pretax basis.
The benefit of after tax contributions is that, because withdrawals are not taxed, the growth accumulated in excess of your contributions is effectively tax free. Typically over the course of 20 - 30 years, growth will exceed your contributions significantly, so it can be a big advantage.
I agree with the two posters above - if you truly intend on retiring in 6-7 years and anticipate that significant of a drop in income, I would continue to contribute on a traditional/pretax basis.
This post was edited on 1/10/20 at 1:41 pm
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