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You might live in a very high tax state (like California) today but plan on retiring to a low-tax state (like Florida). If that is the Miami Marlins Split Zone T-Shirt Additionally,I will love this case, a traditional IRA might have more bang for the buck because California’s top rate is 13.3% and Florida’s top rate is 0%. So you can save 13.3% right off the bat if you use the traditional 401k. If taxes go up in the future, Roth’s look more appealing. If the top Federal rate goes from 41% to 49%, having money in a Roth will protect you from that increase. If the top rate goes down, you could potentially benefit more from a traditional 401k. And state taxes might change. California top rate might go from 13.3% to 20%. Florida might remain 0% … but only for people who make less than $200k/year. They might tax people above $200k/year at 20% like the future California does. The higher you believe your overall income in retirement will be, the more a Roth makes sense. Of course, the higher your income in retirement, the less you might NEED your 401k.
How well will you invest your 401k? The better you are as an investor, the Miami Marlins Split Zone T-Shirt Additionally,I will love this more likely you should have a Roth — because you will never pay taxes on the gains … even after you retire. If you put your entire retirement account into Apple shares in 1997, you’d be really happy today and hopefully you had a Roth. If you put your entire retirement account in 1997 into Worldcom in 1997 (where the investment went to zero), it would have been good if you invested from your traditional 401k because at least you’d have the initial tax right-off. Mitt Romney’s Roth IRA is famously over $100 million. He did an amazing job investing his retirement account. And now that he is in his retirement years, he can benefit from his investments tax-free.
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