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Message
Roth 403B vs traditional 403b
Posted on 3/16/23 at 5:47 pm
Posted on 3/16/23 at 5:47 pm
Question:
A young person has a new job.
Match is 6%.
What salary range would you choose Roth over Traditional?
Very low salary?
Very high salary?
He’s going to do the match %, but asked me which might be better.
I see both arguments. Someone persuade me.
A young person has a new job.
Match is 6%.
What salary range would you choose Roth over Traditional?
Very low salary?
Very high salary?
He’s going to do the match %, but asked me which might be better.
I see both arguments. Someone persuade me.
3
Posted on 3/16/23 at 9:19 pm to makersmark1
For a young person I think the Roth is the better way to go because the capital gains will dwarf (can we still say that?) his initial investment. This assumes he doesn’t need tax deferral now and that Roth tax laws won’t change.
Posted on 3/16/23 at 10:22 pm to CajunTiger92
quote:
and that Roth tax laws won’t change.
With a prospective 7 trillion dollar budget and the country taking in 2 to 3 trillion n taxes it's only a matter of time before they come for the Roth.
Posted on 3/17/23 at 11:41 pm to makersmark1
quote:
I see both arguments. Someone persuade me.
You need to make long-term decisions now with the only guarantee of the rules being different in the future.
Our retirement planning is absolutely insane.
Several attempts to stop high-earners from contributing to Roth have failed in the last two years which I find somewhat reassuring.
But the general rule:
If you are in a lower tax bracket now than retirement —> traditional
If you’re going to be in the same bracket now as retirement—-> doesn’t matter
If you’re going to be in a higher bracket now than retirement—> Roth
But again, you’re only guessing what the tax will be in the future.
Posted on 3/18/23 at 7:07 am to makersmark1
As Hopeful Doc said, it's purely a tax arbitrage.
Typically it is a low salary that should consider roth contributions.
One argument for always going roth is not knowing what taxes will be in the future.
If he really starts making money (and if the plan happened to allow) he could max out traditional and then do after tax contributions which can then be rolled into a roth IRA - AKA mega back door roth. Unfortunately most plans, especially 403b, don't allow it :-\
Typically it is a low salary that should consider roth contributions.
One argument for always going roth is not knowing what taxes will be in the future.
If he really starts making money (and if the plan happened to allow) he could max out traditional and then do after tax contributions which can then be rolled into a roth IRA - AKA mega back door roth. Unfortunately most plans, especially 403b, don't allow it :-\
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