— David compares a Roth IRA to a Traditional IRA
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Viewers beware. Scammers trying to steal your identity and your money posing as David using his logo are on this comment thread. David will be of no help if you get taken. David doesn't care if his viewers and subscribers get burned.
David, I'd love for this channel to not only be about personal finance, but also about the politics of the economy in general
Beautiful explanation David
Can you go over future vs current value of money and how this effects investments with and without taxation over the long run?
Pakman Finance? Diversifying?
As of right now, the Roth IRA (and/or Roth 401k) trump the traditional equivalents of both if your intent when you retire is to minimize taxation of your social security (and pension income if you have the luxury of having one) as well as reducing your income so Medicare insurance is at its lowest AND when you have to start taking Required Minimum distributions (currently age 72) from traditional/taxable retirement accounts (IRA and 401k), those amounts (which get higher as you age) do not start to push you into higher tax brackets in your late 70's and into your 80's/90's.
While reducing your income taxes NOW seems like a great thing for many (particularly those with families and are high wage earners), the possibility is real that income tax rates will rise in the future and your future self will thank you for doing as much with already taxed retirement accounts as you can.
It may make sense initially to do a bit of both to get both advantages, but if Roth IRA's/401k's stay as they are today regarding taxation, when you hit your late 40's and definitely 50's, put all retirement monies into those and enjoy the fact that the withdrawals from them after you retire are not taxed.
General rule is: If you're younger, just starting your career and when starting an IRA – Open a ROTH. If you're opening an IRA when you're older (ie less interest will acrue before you turn 59 1/2 AND you are likely to be in a much higher tax bracket than the younger investor) the traditional IRA is probably the better choice. Not financial advice, just my personal opinion.
Thank you, Sir! Another banger of a good time!
I'd rather have a pension than a wallstreet propaganda tool like an ira
Yes! I needed this advice
This seems very similar to comparisons between LISA's and UK pensions, whether workplace or SIPP. At my last employer I contributed 6% and so did the employer.
2 topic I would find helpful.
Contributing to a 401k without and employee match.
Tips for teaching my children financial literacy.
Great channel
Guys, after almost a year of watching Pakman's channels I think I've crunched the numbers and did some opposition research. I don't think Pakman is a socialist.
Good info and clarity on the difference! Would have liked you to mention that 401k accounts are structured like Traditional IRAs in that the contributions are tax-free. So if you already have a 401k, it's a question of putting all your eggs in the "tax later" basket or diversifying into some "tax now" territory. Personally, I have a Roth IRA with my 401k because I can't predict the future.
My husband and I have been looking into this. Thanks for giving me some information.
“David, you’re a socialist, how can you teach people how to evade taxes”… Thanks for answering my question before I asked it!
So you think taxes should be much higher today and in the future, because you think the government does a good job managing money and providing efficient and effective services to society (much more efficient and effective than the free market or charities that have to compete for private donations)?
So isnt Roth IRA probably better for young people? You dont have to pay taxes on the interest which is a big deal.
David- I saw a while back someone suggested to my gf that she, instead, opt out of taxes and put the amount into a short term mutual fund. Then at the end of the year take the money earned and pay what is owed in taxes and keep the rest. What’s your opinion on this?
Thank you!
There are some different advantages to pre-tax/post-tax based on your current personal top tax rate. Another thing Dave Ramsey sometimes admits, is he pushes people toward Roth, because they're likely to contribute 6,000 to roth, or 6,000 to traditional. Where since the roth is post-tax, they're really contributing like $8,000 to the roth. Saving more without noticing. Behavioral quirks that help people.
This is definitely a new format, hope David is reviewing and learning. I think too much information in the 2nd half of the video without enough explanation/context.
Does this conversation apply when thinking about traditional vs Roth 401k?
I could be thinking about this wrong but since the growth on a RothIRA is also tax free we should typically prioritize Roth over Traditional. Saving on taxes now is great but the growth will be taxed once distributed (which will greatly increase the amount of taxes paid overall). An element of time plays in as well but for younger people, id think Roth should be a primary focus outside of an employer match on Traditional accounts.
Love this channel. Would be very interested to see a video on the backdoor Roth IRA.