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Another route that's uncommon is after tax non Roth. If I wanted a combination of pre/post tax savings I could do the following
18,000 401k
53000-18000-employer contributions= the amount of after tax non Roth contributions one could make
The only caveat is you can not be a highly compensated employee. The irs rule is 110k in income from your employer or the employer can choose to only label their top 20% of earners
So, if I was to make the assumption that my marginal tax rate would be the same in retirement as it is now (I am stuck so deep into 25%, I don't see a way out of it) - then is it better to go with the Roth? Pay tax on contributions only with a Roth, vs Pay tax on withdrawals (contributions plus earnings) later??
No one know what tax rates will do but don't assume your rate will be lower in retirement. It could be higher due to earnings on your investments or because the Government increased rates. Assuming your tax rate will be at lease what it is now is probably a good idea.
personally i would forget differences in tax rates all together. i would look at all the things that are taxable income dependent in retirement that could apply to me and use that as a guide .
aca subsidy , getting your ss taxed , medicare costs , medicare surcharges , effect of rmd's , amt tax , etc .
Well, for someone who is 20-30 years or more to retirement, there's just no way to guess exactly what the right choice will be. Taxation of SS, cap gains, dividends has all changed since I started working. ACA is very new and who knows if it will even exist in 30 years.
The one thing I would count on is the continuation of a progressive tax system. For years when your 401k is your only income source, you will always be able to extract some money at zero tax, and then a bunch more at a very low rate. The rate on the lowest bracket is never going to be 25% or higher, IMO. So if you expect to retire before you can take SS benefits and you don't have a pension, it makes a lot of sense to have some assets in a Trad account if you are getting a deduction at 25% or higher.
A specialist in tax is probably the way to go rather than try to guess. It might be a worthwhile investment to seek advice with someone who knows the current tax code and can advise on a good course for investing with future tax implications in mind. Because things change, one should probably plan to seek updates to the advice every 5 years or so.
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