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Old 05-24-2014, 08:43 AM
 
Location: Baltimore, MD
3,745 posts, read 4,219,341 times
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Quote:
Originally Posted by TuborgP View Post
until the accountants figure out another end around.
Ha, ha. I don't think it'll be an end run around the Roth. However, I agree that there will always be an end run around something - whether it's avoiding taxes or qualifying for SNAP benefits. The devil is always in the details, eh?
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Old 05-24-2014, 09:55 AM
 
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Quote:
Originally Posted by lenora View Post
Ha, ha. I don't think it'll be an end run around the Roth. However, I agree that there will always be an end run around something - whether it's avoiding taxes or qualifying for SNAP benefits. The devil is always in the details, eh?
Yup and legislators after being influenced by lobbyist write details lobbyist already know how to exploit. Hmmmmm
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Old 05-25-2014, 06:02 AM
 
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the roths biggest advantage over a traditional is really about age.

the younger a person is and the longer the ramping up to their higher income days the better a roth works as long as they contribute every year..

the average tax rate with long ramp ups usually has a youngin in a higher tax bracket by retirement not lower then their career average.

the problem is not many young employees starting out can contribute much .

so even though the younger you start the better the roth results the real world fact is most cannot contribute much early on.
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Old 05-25-2014, 08:49 AM
 
Location: Central Massachusetts
4,800 posts, read 4,850,322 times
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Quote:
Originally Posted by mathjak107 View Post
the roths biggest advantage over a traditional is really about age.

the younger a person is and the longer the ramping up to their higher income days the better a roth works as long as they contribute every year..

the average tax rate with long ramp ups usually has a youngin in a higher tax bracket by retirement not lower then their career average.

the problem is not many young employees starting out can contribute much .

so even though the younger you start the better the roth results the real world fact is most cannot contribute much early on.
you can say that about 401k/ira/sep/keough funds as well. however I agree that had Roth been around earlier on I would have contributed to it instead. But since they are more recent in my system it will only be good for me to as I withdraw from savings and pay my taxes the excess I do not use can be dropped into that Roth.
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Old 05-25-2014, 01:20 PM
 
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surprise!. while you think it would come out the same starting early with a traditional the surprise is they do not. in fact the study showed a roth can have as much as a 17% difference in spendable cash in retirement.

here is why :

when you start young and go from low pay to max pay over decades your average tax rate is much lower than your highest earnings later on.

you can actually retire and be at a higher tax rate down the road then your average tax rate all those decades was ramping up.

that sits well for a roth. having a lower tax rate the working years and a higher tax rate into retirement is the perfect roth scenerio.

the traditional ira or 401k would require you to have a higher average tax rate over your working history and a lower one at retirement.

for folks who start young the roth is more beneficial. for folks who start later in life the traditional may work out better.

it works out that way because tax deductions while working are taken on marginal tax rates while in retirement we pay on effective tax rates.
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Old 05-25-2014, 01:51 PM
 
Location: Great State of Texas
86,093 posts, read 72,525,560 times
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Quote:
Originally Posted by mathjak107 View Post
surprise!. while you think it would come out the same starting early with a traditional the surprise is they do not. in fact the study showed a roth can have as much as a 17% difference in spendable cash in retirement.

here is why :

when you start young and go from low pay to max pay over decades your average tax rate is much lower than your highest earnings later on.

you can actually retire and be at a higher tax rate down the road then your average tax rate all those decades was ramping up.

that sits well for a roth. having a lower tax rate the working years and a higher tax rate into retirement is the perfect roth scenerio.

the traditional ira or 401k would require you to have a higher average tax rate over your working history and a lower one at retirement.

for folks who start young the roth is more beneficial. for folks who start later in life the traditional may work out better.

it works out that way because tax deductions while working are taken on marginal tax rates while in retirement we pay on effective tax rates.
That's not a one size fits all scenario though.
I went down a tax bracket when I retired.
The 401K was better for me in my case and I maxed each year once I got up there in salary.
When I withdraw that money I will be in a lower tax bracket.

My taxable income in retirement is less than when I was working.
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Old 05-25-2014, 03:46 PM
 
Location: Wisconsin
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Quote:
Originally Posted by HappyTexan View Post
I went down a tax bracket when I retired.

My taxable income in retirement is less than when I was working.
Same here. Roths would not have been appropriate for me.
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Old 05-25-2014, 04:04 PM
 
Location: Florida
4,365 posts, read 3,704,692 times
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Quote:
Originally Posted by HappyTexan View Post
I've opened a Roth now that I'm retired but doing sub teaching.
I put all my income in the Roth and get to write it off my taxes.
If I need it I can take the principal out with no worries and in 5 years the income generated.

A Roth is much better post retirement for me because I'm just using it to defer taxes on my slush fund income I get from teaching.
There is no tax deduction for a ROTH, only a regular IRA.
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Old 05-25-2014, 04:22 PM
 
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Quote:
Originally Posted by Ariadne22 View Post
Same here. Roths would not have been appropriate for me.
i don't expect to be in a higher tax bracket either when i retire but you all are missing the point. it may have worked out very different for us if roths were around 4o years ago when we first entered the work force. in fact 401k's didnt even exist.

we missed the entire ramping up stage pretty much and the ability to average down our tax rates over our working careers and thats the difference between us and youngins today if they contribute early on. we never got the chance for our long term incomes to average down from all the lower pay years while we contributed.

Last edited by mathjak107; 05-25-2014 at 05:06 PM..
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Old 05-25-2014, 04:24 PM
 
71,643 posts, read 71,777,271 times
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Quote:
Originally Posted by HappyTexan View Post
That's not a one size fits all scenario though.
I went down a tax bracket when I retired.
The 401K was better for me in my case and I maxed each year once I got up there in salary.
When I withdraw that money I will be in a lower tax bracket.

My taxable income in retirement is less than when I was working.
again , you missed the major point about having to start the contributions very early on when first entering the work force for what i said to be meaningful.

if you have not been contributing since starting working decades ago then all bets are off what the study showed so that rules all of us old timers out. our tax rates would never average down by the time we all started contributing.

Last edited by mathjak107; 05-25-2014 at 04:41 PM..
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