When investing in retirement accounts such as a 401(k), or perhaps for you it’s a 403(b), SEP or SIMPLE IRA, or another variety, you will likely be faced with a choice.
Whatever you choose, it’s important that you invest. If you’re employed, there’s a good chance you’ll have some matching dollars invested on your behalf. Even without a match, there are wonderful tax advantages to either option.
If you expect to be in a lower tax bracket when you’re no longer earning an income and withdrawing from your retirement account, you should choose traditional contributions today.
If you expect to be in a higher tax bracket as a retiree than you are right now, Roth contributions are the obvious choice.
– High Income – High Tax Bracket – Single (higher tax brackets for single filers) – High Income Tax State – You Also Invest in a Taxable Account
– Lower Tax Brackets – Married Filing Jointly (related again to tax brackets) – Low or No Income Tax State – Few investments that are not tax-deferred – Far from Retirement