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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75805  
Subject: Re: Roth 401k vs. Traditional 401k Date: 9/28/2012 12:37 PM
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Tax rates, despite what the Republicans are telling you, are at a 50-year LOW. With our yen for spending and our deficit there ain't no where for these rates to go but up.

I generally agree with this part.

I sleep better at night knowing that's not yet another unknown I must factor for when planning my retirement.

The problem here is that what matters for the Roth vs. traditional decision is your personal tax rate, not overall tax rates in general.

Some people have high incomes but got a very late start on retirement savings. For them, a traditional might make sense. They're in a high bracket now, but even if tax rates move up, they could easily be in a lower tax bracket in retirement.

Generally, I suggest a balanced approach. Get some retirement savings in traditional accounts, some in Roth accounts, and some in ordinary accounts (with no special retirement tax breaks). That let's you pick and choose what works best for you each year. If you only have one type of account when you get to retirement, you might get lucky and have picked the right one, but you might not. With a balanced approach, you might not make what is, in hindsight, the best choice, but you are also unlikely to have made the worst choice either.

Roth. All the way.

With some thought on the ideas above, I think you'll see that is just too simplistic for general advice. It's right for some, and very wrong for others.

--Peter
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