Quote:
Originally Posted by lewdog
You don’t want all your income in retirement to come from taxable investments such as 401k or IRAs.
That’s why it’s important for many to contribute to a ROTH. It’s not counted as income in retirement, thus lowering your tax bracket for many.
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Eh. That’s a little wonky.
401s and traditional IRAs have some theoretical advantages.
You’ve paid tax on contributions to ROTH where as 401s and traditional IRAs are not taxed at contribution. In theory your tax rate will be lower in retirement so there may benefits there. Where the ROTH shines is the gains aren’t taxed.
So the gamble you’re taking is the tax on the basis at the time of contribution is less than the tax on the basis and gain at the time of distribution.
Typically it is but is still a gamble.