The Marginal tax rate: (change in tax) / (change in "whatever").EDIT: Having a hard time posting my image file. And, I don't understand the graph -- what exactly is the Y axis?
In your daughter's case, "whatever" is the traditional 401k contribution amount. Because tax goes down as the traditional 401k contribution amount goes up, (change in tax) / (change in t401k contribution) is a negative number - as opposed to, say, the positive marginal tax rate for most Roth conversions.
But when it comes to the Traditional versus Roth question, and "The approach that incurs a lower marginal tax rate will, in most cases, provide you more spendable income" guidance, ignore the negative sign. Instead, think of the negative rate as "marginal tax rate saved on the contribution".
Your daughter should compare that to the rate she expects to pay on traditional withdrawals after she retires. Yes, that's a guessing game but the "use traditional 401k for the first $15K and Roth thereafter" seems a reasonable guess....
Usually (e.g., in your daughter's situation here) it's only the "marginal" curve that applies. The "cumulative" curve becomes useful only when you have to go through a "less favorable" zone to reach a "more favorable" zone. See Worth pushing through the Social Security hump and/or IRMAA cliffs? for one example.
Statistics: Posted by FiveK — Sun Nov 09, 2025 10:22 pm — Replies 39 — Views 1622