[Boilerman]

Originally Posted by rsmurano

I decided decades ago that it will never buy me 1 penny in benefits to go the Roth way compared to the regular 401k way for a few reasons, but 1 main reason:
When I was working, I was in a high tax bracket and I knew for a fact when I stopped working, it didn’t matter at what age, my tax bracket would drop greatly and it has. For example, if I was in a 30% tax bracket when working, I would have to pay 30% taxes on my income before putting any money into a Roth whereas in a 401k, I didn’t pay any income tax and contributed the full amount. So hypothetically, if I wanted to put away $20,000 a year in a Roth using after tax money, I would need $26,000 of income before taking taxes out. But while I was in a high tax bracket, I got to put $20,000 into my 401k and now, I’m in a much much lower tax bracket so my taxes withdrawals are taxed much less than the tax I would have to pay years earlier. This has been true thus far in retirement, with even better benefits.

My work would not do a company match on a Roth whereas I got a lot of company matching that is free money.

The other benefit is that I got a much better return on my money using tax free money than what I would have got taking taxes out earlier. For example: say I had $10,000 to invest in either a Roth or 401k. The full $10,000 would be invested in a 401k because it would be before tax $$$. Now if I wanted to put the same $10,000 into a Roth, I would have had to pay taxes on that money, say I’m in a 20% tax bracket in my working years, I would only have $8,000 to put in the Roth. Over decades, my 401k would make more money because I would have more to compound interest on. This is a fact. Most of the scare tactic financial planners try to scare you by using the same tax bracket in retirement as you were in will you worked. Even if you used the same tax bracket in retirement 20%, you would pay the same taxes on your 401k withdrawals as you would have paid when paying taxes before putting the money in a Roth. Do the math.
But the reality is, you will be in a lower if not a much lower tax bracket in retirement so you will be paying much less taxes on 401k/ira withdrawals than if you paid after tax money in a high tax bracket. Do the math.
We don’t know what things will be like next year or 5 or 10 years down the road. The scare tactic people will say your taxes will be much higher down the road but on the other side of the coin, we just rmd’s pushed down the road by a few years which means less taxes to be paid before larger distributions are warranted, so that gives you more time to cash in on your 401k/ira at a low tax bracket (if not paying 0 tax dollars) so your rmd’s are at a smaller amount in the future.

Which is why Roth conversions after retirement makes sense. Paying lower taxes than you would have while working.