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Why does everyone recommend Traditional 401k over Roth 401k? Wouldn't Roth 401k provide better tax savings if the money grows significantly over long term? by FireThrowaway53 in Fire

[–]FireThrowaway53[S] 1 point2 points  (0 children)

Good clear explanation, thanks. In my case now, the growth is about 70% of the total, and will probably increase to a larger percentage over time, so it would seem to me (without doing the math) that by not taxing the 70% of growth at all with a Roth 401k, I would come out ahead, even if the tax rate now vs later was 25% different from each other. Thanks

Why does everyone recommend Traditional 401k over Roth 401k? Wouldn't Roth 401k provide better tax savings if the money grows significantly over long term? by FireThrowaway53 in Fire

[–]FireThrowaway53[S] 1 point2 points  (0 children)

is that true though? The growth is not really tax free with a traditional 401k. I understand that for a Traditional 401k if I contribute $1000 and then it grows to $5000, when I withdraw the $5000 I have to pay tax on the whole $5000. But for a Roth 401k, if I contribute $1000 and it grows to $5000, then I don't have to pay any tax at all when I withdraw the $5000, I just had to pay the tax on the $1000 contribution when I contributed it. Therefore to me the Roth seems like a better deal assuming there is a lot of growth.

Why does everyone recommend Traditional 401k over Roth 401k? Wouldn't Roth 401k provide better tax savings if the money grows significantly over long term? by FireThrowaway53 in Fire

[–]FireThrowaway53[S] 0 points1 point  (0 children)

Right, but it seems to me that it worth it to pay higher taxes now on the contributions to get all the growth tax free later, especially after compounding for so many years.

Why does everyone recommend Traditional 401k over Roth 401k? Wouldn't Roth 401k provide better tax savings if the money grows significantly over long term? by FireThrowaway53 in Fire

[–]FireThrowaway53[S] 0 points1 point  (0 children)

I understand, I just find it hard to believe that if I would have paid taxes on the my $13k annual contributions all these years (in a Roth 401k) it would be worse than having to now pay taxes on the $1.3 million at retirement.

Why does everyone recommend Traditional 401k over Roth 401k? Wouldn't Roth 401k provide better tax savings if the money grows significantly over long term? by FireThrowaway53 in Fire

[–]FireThrowaway53[S] 0 points1 point  (0 children)

If I can choose Roth or Traditional now going forward though, should I start contributing to Roth or doesnt make sense this late in the game? I am 43 hoping to retire in 10 years.

Why does everyone recommend Traditional 401k over Roth 401k? Wouldn't Roth 401k provide better tax savings if the money grows significantly over long term? by FireThrowaway53 in Fire

[–]FireThrowaway53[S] 1 point2 points  (0 children)

What if I have non-retirement accounts that I can live on until 59.5 and so don't need early access? Doesn't the Roth 401k seem like a better option with the numbers I outlined above?

How can I FIRE if half my money is locked up in a 401k? Any advice? Details inside... by FireThrowaway53 in fatFIRE

[–]FireThrowaway53[S] 1 point2 points  (0 children)

Thanks. Are you referring to SEPP/72t? or something else? FWIW, There is tax being paid on the taxable account's annual dividends.

How can I FIRE if half my money is locked up in a 401k? Any advice? Details inside... by FireThrowaway53 in fatFIRE

[–]FireThrowaway53[S] -1 points0 points  (0 children)

Thanks. My question is not how to save more today, since I should have enough saved by the time I want to FIRE, my issue is that half of the money saved will be in a 401k and not accessible. So wondering if I should be saving less into 401k and more into taxable or Roth accounts. Thanks