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In a Roth? No tax on the capital gains, dividends, or interest. Ever. Traditional 401Ks are actually at a real disadvantaged there - converting capital to earned income under the current tax structure is a bad thing. Of course, this is offset by the huge advantage you mentioned. Anyway, no one can argue that this isn't a terrible thing for the middle and upper-middle class if serious and done but Roths are cool and good and probably better for most people.
Roths are not as good as 401k's for young people because it's always better to compound a larger number.
5000/yr in a 401k compounding at 6% avg return for 30 years = $419k
3600/yr in a Roth compounding at 6% avg return for 30 years = $302k
I'd rather pay taxes (hopefully in a lower bracket) on the $419k than no taxes on the $302k. At retirement the taxes on the 401k can be managed by spreading distributions over time.
Roths are not as good as 401k's for young people because it's always better to compound a larger number.
5000/yr in a 401k compounding at 6% avg return for 30 years = $419k
3600/yr in a Roth compounding at 6% avg return for 30 years = $302k
I'd rather pay taxes (hopefully in a lower bracket) on the $419k than no taxes on the $302k. At retirement the taxes on the 401k can be managed by spreading distributions over time.
The 302K is tax free and the 419K is subject to tax so they are equivalent assuming the same 28% tax rate holds. 419 * .72 = 302. What you potentially get from a traditional is as you mentioned the opportunity to potentially pay a lower tax rate by spreading out your withdrawals over time (and/or living in a lower tax state than you did while working).
Larger numbers being better is the biggest advantage of Roth accounts. Since you are putting in after tax money but the contribution limit is the same Roth 401k/iras effectively have a higher contribution limit than traditional accounts. Using the 28% example, the roth contribution limit is effectively .72^-1 = 39% higher.
The decision on which account mostly boils to two questions:
1. Are you at the contribution cap?
2. Do you live in a high or low tax state?
As Benjamin Franklin said, if you don't want to pay your membership fee, go live among the savages. Buh-bye.
No provision was made in the Constitution (originally) for taxes on income. You might want to do some study on this topic, because the quote you provided above is misapplied.
Yes, PBS and planned parenthood are just really putting so much pressure on that budget, but we need more conventional military to fight people who use pressure cooker roadside bombs. We need more battleships too.
This is up there with the "we can save money on health insurance with tort reform and selling across state lines!!" mantra regurgitated by dimwitted Sean Hannity fans.
Defense spending is the one legitimate budget item of the Federal Government. The Constitution says one of the purposes of the Federal Government is to "provide for the common defense." We could argue about how much is needed, but it is my view that we should have the best trained, most powerful military, and the best weapons, including ships and aircraft, that money and technology can provide. "Peace through strength" is an undeniable truth.
The undeniable truth is that though the Constitution clearly calls for providing for the common defense, our military is used by the wealthy to protect their investments all over the globe.
The undeniable truth is that despite devoting hundreds of billions a year on the most powerful military on earth, we just got our butts handed to us in Niger where the French had to rescue our Special Forces operators.
The undeniable truth is that by sending our military to meddle in other nations affairs and invading other nations for no good reason (Afghanistan, Iraq, ...) we have created enemies who will fight us for generations.
The undeniable truth is that we are spending boatloads of our tax monies to undermine our own security.
The 302K is tax free and the 419K is subject to tax so they are equivalent assuming the same 28% tax rate holds. 419 * .72 = 302. What you potentiall
The $302k in the Roth is NOT tax free. Income taxes are paid each year on the $5000/year that is added to the account yearly -which means $150k was income that was taxed as income the year it was earned. The $5k/year of income taxs are paid at the income tax bracket during working years, which is often a higher tax bracket than during retirement years.
The $302k in the Roth is NOT tax free. Income taxes are paid each year on the $5000/year that is added to the account yearly -which means $150k was income that was taxed as income the year it was earned. The $5k/year of income taxs are paid at the income tax bracket during working years, which is often a higher tax bracket than during retirement years.
You and your facts.
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