Personal Investments • Re: Maximize After-Tax Sub-account of 401K

Would like to express my sincere thanks to both FiveK and SnowBog in guiding my thinking and understanding.

I tried to read the section on misconceptions but do not think I fully understood. The elaboration by SnowBog is what my understanding is. Including below my explanation for review.

Assume the following two parameters

• The tax rate applied on the contribution amount was 22%

• Money put into the Roth account has not gained anything i.e. it was a flatline

Consider two scenarios of withdrawal (60K & 74K) from this Roth account

• For the 60K withdrawal only 1425 will be taxed at 22%, the remainder will be at 12% or less

• For the 75K withdrawal only 16425 will be taxed at 22%, the remainder will be at 12% or less

The basic argument is contributions and gains from withdrawal are likely to benefit from lower tax rates for most people, certainly for me. Therefore contributions to Roth should only follow after maximizing pre-tax buckets both in 401K and Traditional IRAs. Am I stating things correctly. This is quite opposite to what I had understood at the beginning of the discussion thread.

Statistics: Posted by rerrabolu — Mon Dec 25, 2023 3:49 am

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