Investing General Discussion

Furry said:

Im sure that highschool student is being fucking crushed by his tax burden. Infact, this is why I said you only get the traditional if you don't qualify for a Roth. If you make enough money to have a high tax burden a roth is not available to you. (Technically it still is, but that's a story for another time.)

The only exception where you can get a roth and not have it be the ideal situation compared to a traditional is if you are a few years from retirement and have saved practically nothing so you'll definitely be a few tax brackets down in retirement. At that point you're probably screwed anyways.

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I guess there's no one with an income between "high school student" and "Roth IRA phase out."

Seriously, you're a fucking moron. I hope no one takes any financial advice from you.

Mist said:

There's no knobs left to turn. They've been cutting rates and easing for a decade now.

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You never touched a knob, so how would you know?

Sanrith Descartes said:

Assuming you havent, check the limits on deductability with an IRA if you already have a 401k if you decide to go traditional.

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While it would save me 1500 up front per year in taxes, I would get a lot more in the end if Roth continues to be untaxed when it pays out.

moonarchia said:

While it would save me 1500 up front per year in taxes, I would get a lot more in the end if Roth continues to be untaxed when it pays out.

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Don't be a Furry.

This is awful math. If it really is saving you $1500 in a single year, how could that possibly be beaten by a Roth? Doesn't matter if you're talking single or joint either, one is 25% savings and the other is 12.5%...immediately.

You're applying some weird fallacy about how you'd have tens or hundreds of thousands in tax savings 40 years from now while ignoring that you're giving up the opportunity cost of using the tax savings now. If you wouldn't use the Traditional tax savings right now, you're really just talking about upping your spend rate arbitrarily so the Roth wins in the end.

This is nonsense!

Gravel said:

Don't be a Furry.

This is awful math. If it really is saving you $1500 in a single year, how could that possibly be beaten by a Roth? Doesn't matter if you're talking single or joint either, one is 25% savings and the other is 12.5%...immediately.

You're applying some weird fallacy about how you'd have tens or hundreds of thousands in tax savings 40 years from now while ignoring that you're giving up the opportunity cost of using the tax savings now. If you wouldn't use the Traditional tax savings right now, you're really just talking about upping your spend rate arbitrarily so the Roth wins in the end.

This is nonsense!

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I realized the truth of this about 15 years ago and switched everything from ROTH to traditional. I do still have my old ROTH accounts and they will be nice to have in 15 years when I retire, but the simple fact is for normal people, having that extra money now is worth it. Gravel is right on this, at least for average people like me.

Gravel said:

If it really is saving you $1500 in a single year, how could that possibly be beaten by a Roth? Doesn't matter if you're talking single or joint either, one is 25% savings and the other is 12.5%...immediately.

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It's not absurd as long as you have a decent expectation of what tax bracket you'll be in at retirement. The difference isn't dramatic, though, and you're right that for most people a traditional is a better fit.

Captain Suave said:

It's not absurd as long as you have a decent expectation of what tax bracket you'll be in at retirement. The difference isn't dramatic, though, and you're right that for most people a traditional is a better fit.

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Unless you're expecting to be in a higher bracket, which is unlikely, a Traditional is a better fit. Since you're currently employed, and saving enough to actually have, y'know, savings, you're likely earning higher than you will be drawing in retirement.

The only caveat is the idea that we get a Bernie Sanders that raises tax rates exorbitantly on middle class incomes (which honestly, wasn't a concern previously but is becoming more likely now), in which you could expect higher tax brackets. But by this same token, that kind of overreaching government will also likely raid Roths and you're screwed in that scenario anyway.

If you're a high school student you should expect a higher bracket.

Gravel said:

Unless you're expecting to be in a higher bracket, which is unlikely, a Traditional is a better fit. Since you're currently employed, and saving enough to actually have, y'know, savings, you're likely earning higher than you will be drawing in retirement.

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It depends. I'm self-employed and have a very lumpy income. In low years I'm making way less than my planned retirement withdrawal rate and I'll put money in the Roth because the immediate tax cost is small compared to the future gains.

Who the fuck writes these articles, and do they actually get payed? What investor/trader was really standing around going "Oh shit, Biden had a primary win, buy buy buy!"