[USER]

At what point does it make more financial sense to switch from investing in a Roth IRA to a traditional IRA for tax advantages?

Considering factors like income level, retirement goals, current tax bracket, and future tax expectations, when should someone decide to stop contributing to a Roth IRA and start investing in a traditional IRA instead?

I’m curious to hear others’ perspectives and personal experiences regarding the tipping point where the long-term tax benefits of a traditional IRA outweigh those of a Roth IRA.”

[Tom]

The main takeaway is tax rate now vs tax rate later. If the tax rate never changes and you start with the same dollars a Roth and traditional account yield the exact same amount to the penny.

Let’s say you only had 10k in your budget to invest and your return is 8% annually for 20 years.

You would have
$46,609.57 in a traditional. Your after tax (12%) withdrawal is $41,016.42.

For a Roth your 10k after taxes is $8,800 times 8% annually for 20 years is, $41,016.42 which you can withdraw tax free.

Now if you have more money to pay the taxes separately then yes you can say a Roth allows you to dedicate more towards your future.

[Joe]

It rarely makes sense mathematically to invest in a Roth over tax deferred account.

Remember your top margin tax bracket is way higher than your effective tax bracket will be.

Plus with tax deferred you have a bigger pile of money compounding vs the Roth. Step one max out tax deferred accounts.

If any left over then consider Roth. Anyone who gives any other advice is not maximizing your returns.

Roth maybe gives slightly more flexibility but definitely won’t give you more money.

[Paul]

Never …. as long as AGI allows you to … invest in the Roth.

[Sean]

Pretty much never. Because when you’re in middle to high tax brackets, you aren’t eligible for a tax deduction.

[Michael]

There’s clear merit to both especially using pre-tax accounts as a mechanism to lower your income tax bracket.

Compounded growth in an after tax Roth account is not something to be overlooked.

Goal should be to live off Roth account dividends while drawing from taxable accounts (in a lower tax bracket) during retirement

[Tristan]

If your tax bracket in retirement would be so low that you would be in the “zero percent” bracket (no that’s not real, but if your taxable income is less than your standard or itemized deductions and credits) or at a very least, lower than your brackets now

[Steve]

You invest in Roth and brokerage accounts as much as possible, and use tax-deferred accounts to lower the overflow into the next tax bracket.

So don’t think of it as not investing in a Roth as it is increasing your excess into an IRA.

[Author]

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