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not mentioned is the income limits. Almost every engineer I work with is over the limit for Roth, and definitely over the limit for deductible tira. Non deducti

not mentioned is the income limits. Almost every engineer I work with is over the limit for Roth, and definitely over the limit for deductible tira. Non deductible has very little benefit, so might as well go with Roth, or back door into a Roth. I look at it as diversifying against tax law going crazy though, siNce so much of my retirement income is in 401k and pretax. Also the limits are a third of 401k, so it's only a quarter of retirement savings, and principal can be pulled out if needed.

tcoppi 10y ago
If you aren't contributing the max to your 401k and IRA I would do that before considering Roth contributions, unless you really believe tax rates will explode such that your overall rate in retirement is higher than your marginal rate today. If that is the case you should also consider the risk that the law will be changed to tax Roth on withdrawal of capital gains, which I believe has been floated in the past.
- idunno246 10y ago
  And the risk that the tax laws on 401k will change too. Also, I missed that's in the self employed section so I don't know much about that. But if you have and can afford to max out a 401k, you probably can't get a deductible tira so it's really a question of taxable account vs Roth.
  - tcoppi 10y ago
    How would 401k laws change, you are already taxed when you withdraw from a 401k normally? The risk with Roth laws changing is you get double-taxed because the government needs money, with a 401k you have gotten the benefit the moment you contribute money to it, after that all they can do is literally confiscate money from it, or change it to a regular taxable account, but you've still already come out ahead of contributing to a Roth in either case.
    - zeveb 10y ago
      > How would 401k laws change, you are already taxed when you withdraw from a 401k normally? I can imagine wealth taxes at some point ('those fat cats never paid taxes on all that money!'). Frankly, I don't think it's possible to be too pessimistic about the future.
      - tcoppi 10y ago
        If we end up with wealth taxes you are still more screwed by contributing to a Roth instead of a 401k, because at least with the 401k you avoided paying taxes in the past.
        hx87 10y ago
        Depends on whether the tax is the same on Roth and Traditional accounts (Why are you comparing 401k and Roth? They are completely orthogonal concepts.). If there is a tax, deductions for past taxes paid on Roth accounts are likely.
        tcoppi 10y ago
        > Why are you comparing 401k and Roth? They are completely orthogonal concepts. Because the entire thesis of this thread is that it is better to contribute to a 401k and other pretax accounts before contributing to a Roth under nearly all circumstances(other than at the beginning of your career) that don't involve massive tax raises in the future.
        hx87 10y ago
        Roth 401(k)s (and traditional IRAs) do exist, you know...
        tcoppi 10y ago
        For taxation purposes, traditional tax-exempt IRAs are equivalent to 401(k)s, and Roth 401(k)s are equivalent to Roth IRAs. Whenever someone refers to contributing to one type of account or the other over another type of account, the ones that are equivalent are... equivalent(for taxation purposes).
loeg 10y ago
> Non deductible has very little benefit, so might as well go with Roth, or back door into a Roth. Non-deductible IRA actually gets a worse tax treatment than an ordinary taxable account, due to the long-term capital gains rate being lower than the income tax rate.

tcoppi 10y ago

If you aren't contributing the max to your 401k and IRA I would do that before considering Roth contributions, unless you really believe tax rates will explode such that your overall rate in retirement is higher than your marginal rate today. If that is the case you should also consider the risk that the law will be changed to tax Roth on withdrawal of capital gains, which I believe has been floated in the past.

idunno246 10y ago
And the risk that the tax laws on 401k will change too. Also, I missed that's in the self employed section so I don't know much about that. But if you have and can afford to max out a 401k, you probably can't get a deductible tira so it's really a question of taxable account vs Roth.
- tcoppi 10y ago
  How would 401k laws change, you are already taxed when you withdraw from a 401k normally? The risk with Roth laws changing is you get double-taxed because the government needs money, with a 401k you have gotten the benefit the moment you contribute money to it, after that all they can do is literally confiscate money from it, or change it to a regular taxable account, but you've still already come out ahead of contributing to a Roth in either case.
  - zeveb 10y ago
    > How would 401k laws change, you are already taxed when you withdraw from a 401k normally? I can imagine wealth taxes at some point ('those fat cats never paid taxes on all that money!'). Frankly, I don't think it's possible to be too pessimistic about the future.
    - tcoppi 10y ago
      If we end up with wealth taxes you are still more screwed by contributing to a Roth instead of a 401k, because at least with the 401k you avoided paying taxes in the past.
      - hx87 10y ago
        Depends on whether the tax is the same on Roth and Traditional accounts (Why are you comparing 401k and Roth? They are completely orthogonal concepts.). If there is a tax, deductions for past taxes paid on Roth accounts are likely.
        tcoppi 10y ago
        > Why are you comparing 401k and Roth? They are completely orthogonal concepts. Because the entire thesis of this thread is that it is better to contribute to a 401k and other pretax accounts before contributing to a Roth under nearly all circumstances(other than at the beginning of your career) that don't involve massive tax raises in the future.
        hx87 10y ago
        Roth 401(k)s (and traditional IRAs) do exist, you know...
        tcoppi 10y ago
        For taxation purposes, traditional tax-exempt IRAs are equivalent to 401(k)s, and Roth 401(k)s are equivalent to Roth IRAs. Whenever someone refers to contributing to one type of account or the other over another type of account, the ones that are equivalent are... equivalent(for taxation purposes).

loeg 10y ago

> Non deductible has very little benefit, so might as well go with Roth, or back door into a Roth. Non-deductible IRA actually gets a worse tax treatment than an ordinary taxable account, due to the long-term capital gains rate being lower than the income tax rate.