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I can only answer why I don't use it: I maximize my 401k PRE-tax contributions to the extent allowed by law, rather than opting for the Roth.
Very simply, I am in my peak earning years and my marginal tax rate during this time will likely be much higher than when I retire --- primarily as my income in retirement will be much lower.
“Many asset managers’ websites don’t nudge retirement savers into favoring a Roth 401(k), however. The calculators they offer to compare the advantages of Roth and traditional 401(k)s often make Roths look second-rate.”
Think about it. Why encourage people to pay taxes before investing or do a conversion later in life which may result in their not having as much left over to invest? Your fiduciaries stand to get a higher “cut” from your higher pre-tax balance than after you’ve paid taxes on it. They’re charging their management fees on money which you’ll eventually need to cede back to Uncle Sam. Double-dipping in a sense.
I can’t speak to the wisdom (or lack thereof) of contributing to a Roth in the early years. May or may not make sense. But if you can afford to pay those taxes at some later point and convert, I think it makes a lot of sense - especially if you can do it with some depreciated asset that stands to rebound.
The thing to remember: All the money you earn on that Roth going forward (potentially for many years) is fully tax exempt. The gift that keeps on giving ...
Comments
Very simply, I am in my peak earning years and my marginal tax rate during this time will likely be much higher than when I retire --- primarily as my income in retirement will be much lower.
Think about it. Why encourage people to pay taxes before investing or do a conversion later in life which may result in their not having as much left over to invest? Your fiduciaries stand to get a higher “cut” from your higher pre-tax balance than after you’ve paid taxes on it. They’re charging their management fees on money which you’ll eventually need to cede back to Uncle Sam. Double-dipping in a sense.
I can’t speak to the wisdom (or lack thereof) of contributing to a Roth in the early years. May or may not make sense. But if you can afford to pay those taxes at some later point and convert, I think it makes a lot of sense - especially if you can do it with some depreciated asset that stands to rebound.
The thing to remember: All the money you earn on that Roth going forward (potentially for many years) is fully tax exempt. The gift that keeps on giving ...