Match outperforms Roth, Roth outperforms Traditional

by | Apr 14, 2024 | Traditional IRA | 26 comments

Match outperforms Roth, Roth outperforms Traditional




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Match Beats Roth, Roth Beats Traditional: Which retirement account is Best for You?

There are several types of retirement accounts available for individuals looking to save for their future. Two popular options are the traditional IRA and the Roth IRA. Each of these account types has its own set of benefits and drawbacks, making it important to carefully consider which one is the best fit for your financial goals and circumstances.

One key factor to consider when choosing between a traditional and Roth IRA is how the accounts are taxed. In a traditional IRA, contributions are typically made with pre-tax dollars, meaning that you will receive a tax deduction for the amount you contribute. However, when you withdraw money from your traditional IRA in retirement, those withdrawals are subject to income tax. On the other hand, contributions to a Roth IRA are made with after-tax dollars, so you do not receive a tax deduction up front. However, qualified withdrawals from a Roth IRA in retirement are tax-free.

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For some individuals, the tax benefits of a Roth IRA can make it a more advantageous option than a traditional IRA. This is especially true for younger individuals who are in a lower tax bracket and expect to be in a higher tax bracket in retirement. By paying taxes on contributions up front with a Roth IRA, they can avoid paying higher taxes on withdrawals later on. Additionally, Roth IRAs do not have required minimum distributions (RMDs) like traditional IRAs, allowing account holders to keep their money invested for longer if they do not need to withdraw funds.

On the other hand, traditional IRAs can be a better option for individuals who expect to be in a lower tax bracket in retirement than they are currently. By receiving a tax deduction for contributions made to a traditional IRA, they can reduce their taxable income in the present. Additionally, traditional IRAs may be a good choice for individuals who need to lower their taxable income in a particular year, as contributions may be tax deductible.

Another important consideration when choosing between a traditional and Roth IRA is eligibility. While anyone with earned income can contribute to a traditional IRA, there are income limits for contributing to a Roth IRA. For 2021, individuals with modified adjusted gross incomes (MAGIs) of $140,000 or more (or $208,000 or more for married couples filing jointly) are not eligible to contribute to a Roth IRA. In some cases, individuals may be able to contribute to a traditional IRA and then convert those funds to a Roth IRA through a backdoor Roth IRA conversion.

Ultimately, the best retirement account for you will depend on your individual financial situation and goals. It may be beneficial to consult with a financial advisor to determine which type of account is most suitable for your needs. Whichever option you choose, the important thing is to start saving for retirement as early as possible to take advantage of compound interest and grow your nest egg over time.

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26 Comments

  1. @IamL.I.S.A

    You suggest that poor people should invest in corporations who aren't willing to pay basic livable wages? Would that not directly speak to the corporation that this is acceptable? I would encourage boycotting all corporations who are not willing to pay their employees. His advice is why we have 8%+ greedflation.

  2. @WCGwkf

    I do about 20%. 6% is for the companies 50% match and then I do another 14% in my own investments. So in total i suppose i have 23% of my pretax income value going to investments. Glad i got a house before shit got crazy

  3. @sbandy1278

    Have to say I follow this plan and have definitely seen success. My biggest issue is I can't continually put 15% of my gross income away because I'm constantly having to build back my emergency fund. One month it's the washer needs replaced, the next the car needs work, this month I owed taxes when I've never owed taxes or made changes to my w4. It's always something

  4. @Jora_Barguzin

    I have match on my Roth(401)k

  5. @jasonjunior1848

    The max is 7k for Roth and traditional combined though?

  6. @oldtomplatz8862

    I’m 33 currently and investing in my governmental 403b. I’m a teacher and pay 6.9% into the state pension and 8% into my 403b (tax deferred). It is through vanguard, but my question is whether or not I should start making Roth contributions from here on out. My current salary is 50k and will be rising every year from here on out.

    Or would I be better off starting my own Roth IRA and contributing to that along with my 403b?

  7. @josephomole6404

    Imagine maxing out your roth ira and your 401k and still not having invested 15% of your income.

  8. @I_stepped_in_SF_shit

    Im gonna die laughing when Ocassio Cortez (or some other do gooder) recends the tax benefits and taxes roths anyways in the name of "making rich people pay their fair share"

    Do you guys know how many rich people have back doored millions (and in extreme cases, billions) of dollars into roths? The democrats are gonna go after that money for SURE.

    It might not be the most efficient way to deploy your money but im telling you guys, DO NOT TRUST OUR GOVERNMENT TO DO THE RIGHT THING, TAKE YOUR TAX BENEFIT NOW

  9. @Aliciabpd

    How can i invest in Roth and not pay so many taxes???

  10. @rfish9411

    What is a “match”?

  11. @keithredsox36

    How to do this with childcare costs ?!

  12. @toddh2000

    Depends on your income. Right now my wife is working full time. That usually isn’t the case. We still do Roth, but have put more into the 401k than usual. I think his message might be a good rule of thumb. However it’s not a one size fits all answer. Sometimes he can hurt his audience by trying to keep the message simpler than it is.

  13. @dogegflover6268

    Ramsay is so old school thinking smh

  14. @rez7287

    its definitely not as simple as saying "roth beats traditional". There are plenty of times when traditional is better.

  15. @alexmolnar5725

    So question if I own company and do solo 401k . How much match do I make the company match

  16. @jswin32

    Why not 20%

  17. @lsg2013

    Why not 20%? Does the 5% above 15 go towards things like real estate?

  18. @rogerobryant3019

    I am 53 yrs old have zero savings 1k in debt
    No stocks bonds or 401k I am married my wife is on disability
    My car is a 2009 crv Honda I will work u til the day I die

  19. @ahoyt7523

    For 100% disabled vets with TDIU, what approach should they take, after they have gotten out of debt? They lose the TDIU income if they earn additional income above the poverty line (besides their va payment) and they got the TDIU because their disability prevents them from working. How should someone in this situation invest, as they cannot have a 401k? Do you just go straight to buying mutual funds? We have “just enough”. Bills are paid, no debt. However, we have some home repairs to do, and very little wiggle room to invest.

  20. @Prof.GeorgeGrasser

    Penny Stocks hit three times for me since 2009. I had to buy over Fifty positions and wait for one of them to hit, but each hit was a life-changing amount.

  21. @dark14life

    Let me just put 15% of 0 aside aaaannndddd I'm still broke.
    This only works if you already have money, dummy.

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