Personal Investments • Roth 401K vs Traditional 401K

Do you qualify for the saver's credit and/or earned income tax credit if you contribute to the Trad 401K?

https://www.bogleheads.org/wiki/Saver%27s_credit

KlangFool

So true.
If you can reach the tax credits, even 12% may be too high of a cost for Roth.

One other potential tax benefit is increasing your premium tax credit if you get insurance through the Affordable Care Act marketplace; this isn't relevant if you have insurance through your employer.

But if you don't have any additional tax benefit from reducing your income the Roth is likely better in the 12% bracket. The reason is that if you retire in the 12% tax bracket, your marginal tax rate is likely to be 18% or 22.2% once you start Social Security because of the phase-in of Social Security taxation. Thus, if the marginal tax rate is 12% now, it is better to use the Roth.

Statistics: Posted by grabiner — Wed Aug 28, 2024 7:49 pm — Replies 34 — Views 1904

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