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C8 Roth or traditional

A younger adult reviewing finances and an older adult enjoying retirement outdoors. — The tax rate today may differ from the rate in retirement.

Roth versus traditional: when do you pay income tax? In this simplified example, you have $1,000 of pretax pay, your current tax rate is 12%, and investments grow fourfold. Traditional: $1,000 goes in and becomes $4,000, then withdrawal tax applies. Roth: $120 tax is paid now, $880 goes in and becomes $3,520, assumed tax-free at withdrawal. At a 12% future rate, both net $3,520. At 22%, traditional nets $3,120. At 10%, traditional nets $3,600. Vote: Which factor should NOT drive your choice?

DISCUSSION POLL

Which factor should NOT determine Roth versus traditional?