Basic math of Roth vs Traditional many get wrong

Honestly, how many people fall into the category of earning enough where the traditional is more beneficial than the Roth?

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Honestly, how many people fall into the category of earning enough where the traditional is more beneficial than the Roth?

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The sweet spot is to have enough traditional so that your trad withdrawals + SS + keeps you in the 12% bracket, then Roth after that.

Some people are late starters. They are probably better off in trad.

Sometimes plans change, such as getting married late in life, then all the math changes.

Some people want to retire early and use 72t withdrawals. If you draw your assets early, even without penalty, some of the Roth tax benefits go away. You can get by this in a Roth IRA by converting trad to Roth, but you have to have trad first.

A Roth Ladder might be very useful if you retire early, but you have to convert from trad.

Some people want to do trad now then convert it to Roth when they are retired and have lower income, therefore paying lower taxes on the conversion.

Some people want to use trad contributions to lower their taxable income to get a more favorable tax outcome, maybe to try to avoid IIRMA when they retire.

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Basic math of Roth vs Traditional many get wrong
Many including professionals get the basic Roth vs Traditional math concept wrong.

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Thanks for posting.

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Honestly, how many people fall into the category of earning enough where the traditional is more beneficial than the Roth?

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I did. I think a lot of people do, especially in their peak earning years.

Have a trajectory to RMD kaboom to prove it!

Agreed, tax rate is the primary variable. Specifically, current bracket vs future EFFECTIVE rate on withdrawals.

I'm just repeatedly surprised by the prevalence of misunderstanding how the math actually works. In previous thread, I was told it was a "very short sighted strategy" to prefer projected 12% Traditional withdrawals over 22% Roth contributions. (that poster mentions clients which is troubling) Another responder made the common mistake that Roth beats traditional the more years you have. We even have those insisting on comparing same exact contribution amount ignoring tax on Roth contributions. Unfortunately, those that dont grasp the foundational math are often strong proponents confidently spreading their misinformation.

Thats before getting into the many complexities of individual situations. The math is no longer simple when accounting for all the factors that effect actual effective withdrawal tax rate. But if they dont get that simple math right the complex math is impossible.

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how many people fall into the category of earning enough where the traditional is more beneficial than the Roth?

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me. i have had a TIRA for ages. had no choice.

Has anyone developed an AI tool where you just plug in all the assumptions and voila!
My situation is difficult because my income can fluctuate pretty significantly. And what I consider “retirement” is going to be a steady off ramp over the next 3-5 (I’m 51) years that results in some very part time low-stress completely remote work that I actually enjoy and keeps my mind sharp.
We will also have three houses with no debt (two of them at least periodically rented and can be full-time).
I’ve paid into SS since I was whatever age they allow you do be a W2 employee (my first job was at 12).

It’s really hard for me to calibrate everything under these circs. Right now we have all SEP and trad IRAs and a couple 403(b)s we need to roll over.

Right now 52% of investments are Roth/brokerage. 48% in traditional ira. Anticipate when we retire about 60% with be post tax but think that’ll help since retiring early and can be flexible with some tax planning