Quick question....

Son is 23 and has a new job. He can invest in a regular 403B or a Roth 403B. His employer will match up to 8.25% of his salary. I have not looked at long-term ramifications previously because I was never presented with an option. With the way this country is going, is it better to pay Caesar now (Roth 403B) or down the road (regular 403B)?

Thank you!!!

Sgt. Schultz said:

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Quick question....

Son is 23 and has a new job. He can invest in a regular 403B or a Roth 403B. His employer will match up to 8.25% of his salary. I have not looked at long-term ramifications previously because I was never presented with an option. With the way this country is going, is it better to pay Caesar now (Roth 403B) or down the road (regular 403B)?

Thank you!!!

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Would be an easy decision if you knew the tax law during his lifetime, at the time he retires, and for the rest of his life as well as his net worth at retirement.

Though I don't expect it to happen, some form of a consumption tax would negate the benefit of a Roth 403B.

Go Roth for sure at that age

Exactly. I think it's nice having diversified tax accounts

It depends on what his marginal tax bracket is now vs what he expects when he retires. Most likely his tax rate will be higher which would make Roth the right choice, but that might not be the case if he plans to have significantly lower expenses.

The other items to consider are implications of a large tax deferred account on items such as SS tax torpedo, IRMA, and RMDs. Most of those can be addressed via Roth conversions at retirement when income drops, but again, if his marginal tax bracket is expected to be higher then it makes sense to do Roth now.

I used to have that option and went mostly Roth especially earky on. Now I have 401k that could also have Roth but swapped to pretax to avoid state taxes that won't apply in the future.

Sgt. Schultz said:

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Quick question....

Son is 23 and has a new job. He can invest in a regular 403B or a Roth 403B. His employer will match up to 8.25% of his salary. I have not looked at long-term ramifications previously because I was never presented with an option. With the way this country is going, is it better to pay Caesar now (Roth 403B) or down the road (regular 403B)?

Thank you!!!

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I have a new Roth 401(k) option at work starting in 2024 (thanks SECURE 2.0) and was playing around with this:
https://www.bankrate.com/retirement/401-k-or-roth-ira-calculator/
https://www.aarp.org/work/retirement-planning/roth_vs_traditional_401k_calculator.html
https://www.capitalgroup.com/individual/planning/tools/traditional-vs-roth-401k-403b-analyzer.htm

My assumption is that even though I expect to drop to a lower tax bracket in retirement than I am earning at today, that the tax code will not be as favorable in 20-45 years from now when I will be (hopefully) making withdrawals. So the current and future rates are likely a wash.

I also expect future inflation to far outpace the historical norm. I have not yet wrapped my mind around whether or not there is an advantage in deferring tax payment until later, paying back the government with their less-valuable dollars.

Thank you for all of your thoughts!!!