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<<Would you rather have $1 million tax deferred, or $500K tax free???>>

Is this a trick question? I would take the $1 million>>


Say that you live in a high tax state, with a tax rate of 12% or so. And your top end Federal tax rate would be about 40% (not to mention the higher EFFECTIVE federal tax rate when you lose your personal exemptions and itemized deductions). And God help you if the ordinary tax rates get kicked up in the future.

Since tax deferred means just that (i.e., SOMEBODY will pay taxes on these ordinary rates) these amounts really are really almost equal.

So, it was kind of a trick question...just tricky enough to make you think about the different alternatives.

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