The surprise factor may disappear when one realizes that redbeard had it correct.
His points were (and remain) that
1) saving 35% on some amount of contributions while paying 0% on withdrawals would be a good thing, but
2) saving 35% on further contributions while paying 50% on withdrawals would be a bad thing. I trust that all would agree.
I agree his points are valid, particularly when you raise the marginal tax rate by 42%, but his math on the effective tax rate is wrong by considering half of the income in one example and not the other.
Contributions could also span tax brackets, leading to one common suggestion: make enough traditional contributions to drop below a 22% rate, then switch to Roth for additional contributions while paying a 12% rate.
Sure, it could happen, but it's less common due to the scale of dollars involved ($10s vs. $100s of thousands in many cases). Regardless, I never had that opportunity, all of our contributions would have been taxed above 24% and I didn't have access to Roth 401ks ¯\_(ツ)_/¯ I've suggested all tIRA/t401k contributions above 24%, all Roth below 20% so on that front, we agree as well!
Statistics: Posted by murrays — Sat Jan 18, 2025 7:28 pm — Replies 36 — Views 3047