I'm brand new to 401k's. I live in a very high cost of living area. All of the federal income taxes I've paid that last two years have been refunded and I expect the same to continue this year. Since I pay near zero in taxes already, does a Roth 401k make sense for me for the time being?
I pay almost no taxes, should I use a Roth 401k?
byu/MyAudioDNA inpersonalfinance
Posted by MyAudioDNA
3 Comments
you’re living my dream life😂
( I don’t know what to answer in your question )
I wouldn’t go traditional if you’re in the 12% tax bracket or below. You must not make much money.
A Roth is a retirement investment vehicle with a much longer time horizon than the next few years. You contribute with post-tax dollars, so it doesn’t matter how much or little you currently pay in taxes.
The biggest benefit of a Roth is that whatever you invest with that money will grow over time, and you’ll never owe taxes on the gains, as long as you withdraw them after age 59.5. Compare paying 0% in capital gains taxes to the usual 15%, and that’s significantly more money for you over many years of time.
There is an income cap on contributing to a Roth, so the earlier you contribute to one the better while your income qualifies you, and the more you can contribute the better because there’s an annual maximum on contributions.