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This video finally answer my question
It’s going to be hilarious when we get to retirement and find out the air is toxic, it’s too hot to live in most areas and we don’t have clean water to drink.
amen
Hey? Duh your roth every week your getting ramholed on taxes from your pay? As the 30yrs go on in your magical million dollar tax free 60 years old rambable this dude was ramholed for 30 years.
Love Dave but his logic is wrong here.
The traditional would have a much larger balance that would offset the Roth no tax. Basically pay me know or pay me later.
I believe another benefit is that you are not RMD on Roth IRA!
Protip.
How much are you making before retirement?
How much are you drawing out per year in retirement?
Compare the two. If 1>2, use traditional, else use Roth. If your salary is about the same it's a wash
Dave is wrong about the taxation of traditional 401k. It is taxed as it is distributed. What idiot would empty his 401k in one year like that lol
He’s also using a return rate of 13% a year which is unrealistic for a 401k. Conservatively you can plan on 5-8% growth.
Yea he is definitely over simplifying it. You can contribute more to a traditional because it’s pre tax so it would grow more
My biggest mistake was procrastinating and not starting one as soon as I was eligible. It's really not that hard to open an account and manage yourself. And you can also have your brokerage manage it for you. If you're reading this, start now.
can someone help me? is the lifecycle fund set to retire at 2045 a good choice for roth TSP?
He completely neglects the fact that you get more money each paycheck for the same percentage with Pre-Tax and that growth compounds overtime. Huge advantages to a Roth but it doesn't seem like he's being intellectually honest in this video or offering a fair comparison.
What if you take a low paying job before retirement so you could be in a lower tax bracket and pay less taxes on your traditional retirement money? Is this possible?
Investments is the best way to find balance between saving and living, This way
you have your savings
intact and then live comfortably off the revenue coming in from your investments.
Financial freedom is possible, you just need to know what to do
and when to do it. I am a living testimony.
If I take out a little contributions one year , are you able to put that amount back in ?
So it’s really jus different sides of the same coin, you just get to pick how you get taxed.
Roth: IRS: “Oh you’re gonna invest in your golden days Today? Sure! Grabs you by your button up collar, camera zooms into the face for intense effect “Just pay me mine upfront”
Traditional IRA: IRS: “Yes! You wanna live life tax fee! Then GO ON AHEAD!! As long as you remember that Uncle Sam is always checking your pockets and at the end of your life, you’re gonna pay for all that which you owe me!!”
I’m 20, and the only thing I know about life is what I’ve overcome. So anyway I kind of find that investing in a traditional IRA would benefit me now and into the long term. By having untaxable income, i could have more money per month in a studio apartment. And put money up for my IRA. Any thoughts and ideas please feel free to lmk what I don’t know, I know nothing.
but wouldnt the compounding interest be more because more money is in there on a traditional?
What about maxing out with traditional through your employer and then using the tax reduction to invest in a traditional ROTH from there? Also, couldn't you be in a lower tax bracket from your 401K annuity and thus be paying less taxes on that money than you would on the money that went into the ROTH? You could use your traditional ROTH as an annuity to pull yourself into a lower tax bracket and then the result is overall a lower lifetime tax burden.
I think I know what I want to do, but I need other opinions. Just in case I miss something.
Nice video, I am new to online investments, I have been practicing using a demo account. I
like to prepare for my future, I tried starting up a Roth IRA account. I don't know much
about it or which is better. I am scared that I don't know enough to start all by
myself. I am willing to try, but I need help on exactly what to do next.
I like Dave and value his opinions but his extreme over simplification of this question is ridiculous. It makes me rethink all of the other advice he has provided. Either he doesn't know what he's talking about (which I doubt), or he's intentionally misrepresenting the the tax differences between traditional and Roth 401k to benefit his argument.
Can you clarify please why it’s not always recommended to open Roth IRA when you over 60.
Thanks.
Roth is much better. Roth's growth (capital gain and/or dividend) is not taxable while Traditional, both growth and principal, are taxable when you withdraw. So for Roth, you're only paying the tax margin you owe while traditional you're paying both the tax margin you owe AND the tax of the growth.
Ok. What if you go with a 401K now, in order to get the tax benefit of lower income bracket and then convert to a Roth 401K when you're close to retirement? Pay the taxes before you head into retirement so that it doesn't effect Social Security or counted as income during retirement? Hope that makes sense.
So how does this scenario account for pre tax savings (401k) and employer match (401k/HSA)? Neither benefits w/ IRA
My employer is taking Roth contributions out against gross pay, are they doing it wrong? I thought it would be after all deductions are taken from gross pay (taxes for example)
I was told by my hr benefits that converting to a Roth was not taxable. The call was recorded. What can I do legally?
So if you live in CA you go with a Roth IRA? Got it!
Dave failed to mention the Roth annual limit for contribution of $7,500 a year
The big thing that Dave is missing here is for people with average income they will be able to save more dollars with traditional. This means more compounding and larger balance at retirement. Also if you retire with $3 million in an IRA the taxes aren't going to cause you to starve. You just write a check and move on.
Should I invest in a non matching 401k or an IRA?
The employer match and it’s earnings in the Roth 401k are not tax exempt……
I asked my accountant about moving my 401k to a roth 401k and he recommended not to do it. I would pay too much in taxes.
I completely get what everyone is saying about the calculation. With a Roth you would either need to sacrifice how much you invest or take home pay. Thinking like Dave I would assume when he says get to 15% he would recommend budgeting as necessary to make it the same invested as a traditional, just have less spending so you could survive on less take home pay.
It’s anyones guess what tax rates will be in the future but it adds some piece of mind now knowing you can afford the taxes and not have to worry about it years from now. Of course everyone’s situation is different, just speaking generally.
if that's the case why would anyone go with traditional?
But you keep more on the front end in a traditional. Worth mentioning.
if you have lower income – roth if you're making more and want to reduce taxes – traditional
Not to mention you can guarantee the income tax on it will be a lot more when it's time to pull it out. It's best to pay today's rates.
Why not do both?
I have a trad IRA alongside a 401K and some mutual funds. However, the IRA is quite new funded by taxed income. I think i would rather have a Roth but I am told I cannot make direct deposits into one.. Anyone know anything about "backdoor" Roths? Can I switch over?
Oops sorry you are correct. I was thinking of Mutual Funds purchased outside of the 401K – typically they are taxed as LT Cap gains. Good catch!
Thank you!
I would rather pay taxes now because that way these crook politicians can’t get there greedy hands on it like they have been trying to do
Wouldn't it be less since you're taxed on it in the beginning? So what's the difference after paying the taxes upfront?
Who pulls out their entire retirement at once?
What about that "tax break" reason the millionaires were talking about?
This assumes the tax rate at withdrawal is the same as at the time of contribution to a traditional 401(k). Contributions come off the top of your income and are subject to your top marginal tax rate. Say 24% or 32%. But withdrawals should be taxed at the bottom of your income and the lowest tax rates. 10% or 12%. So I ask you is it better to pay 32% tax now, or 12% later? I assume the bottom tax rates could be jumped up to 32% someday, but that seems unlikely.
Never pay the tax man before you have to.