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Money and Finances
Reply to "Roth 401K or Regular 401K"
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[quote=Anonymous]One common misunderstanding is the assumption you will automatically be contributing less money to a Roth than TRAD. This misunderstanding stems from comparing pre-tax dollars to post-tax dollars where the post-tax dollars are smaller due to taxes. But in reality, if you plan to save 5k you most likely would deposit 5k pre-tax dollars into a TRAD IRA or deposit 5k post-tax dollars into a Roth IRA. In this scenario you're actually investing more into the Roth than the TRAD because you're not only investing the 5k but also investing/paying the taxes upfront. If your effective tax rate is 25% and you deposit 5k into a Roth you would need to deposit $6,666 into a TRAD for an equal investment.[/quote]
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