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It’s hard to beat the wealth-boosting power of a traditional 401(k), but there are a few specific scenarios where it might make sense for you. Find out in two easy steps below.
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Find your profile in the table below, based on your salary. You'll see which 401(k) type yields the highest after-tax value.
Your expected tax rate has an impact.
We used California, Pennsylvania, and Texas as examples because they represent high, medium, and low tax rates, respectively.
You can see that the low tax rates in Texas made a Roth worth it for Terry, when he’s making $50k per year. While no one can perfectly predict where they’ll live in the future, these scenarios cover a broad range.
Yes, Iif your employer offers both, you can contribute to a Roth 401(k) and a traditional 401(k).
However, keep in mind that your annual contribution limit would apply across both accounts. It’s also possible that there are other smart moves you could make, instead of funding a Roth.
Personal finance is, well, personal. While these scenarios can guide you, a deep-dive analysis is the only way to uncover all the tax strategies that will boost your future wealth.
That’s where Playbook comes in!
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