Navigating 401(k) Decisions: Income, Taxation, and Business Ownership

#541: Ever wondered if you're making the right choice between a Traditional and Roth 401(k)? You're not alone. 

In this episode, Katie Gatti Tassin, host of MorningBrew’s Money with Katie podcast, joins us to tackle this common retirement savings dilemma.

We deep-dive into the debate between using Traditional vs. Roth 401(k) accounts for retirement savings, in the context of:

1. Future tax rates 
2. Tax complexities for small business owners and high earners
3. Social Security uncertainty
4. Stock-based compensation 
5. Incentives for business owners vs. employees

Katie explains her strategy for maximizing retirement savings while minimizing taxes. She suggests that for some people in higher tax brackets, maxing out a traditional 401(k) and then investing the tax savings elsewhere might be the way to go. 

But as we dig deeper, it becomes clear that there's no one-size-fits-all answer.

We explore the Traditional vs Roth question, discussing how your current income and expected retirement spending can affect your choices. 

It's not just about the math, though. The unpredictability of future tax rates and policies adds another layer of complexity to the decision.

Social Security plays a major role, as well. We discuss its current funding situation and the challenges it might face in the future. 

This leads to a fascinating discussion about how AI might impact future costs and lifestyles. Could things actually get cheaper in the future? 

Taxes for high earners and small business owners is another focus. We break down some misconceptions about who falls into high tax brackets. It's not always as simple as it seems.

Stock-based compensation is another hot topic. We discuss how it affects corporate decision-making and the wider economy. This leads to an interesting comparison of the incentives for business owners versus employees.

Throughout the episode, we keep coming back to one key point: no matter which type of account you choose, the most important thing is to contribute as much as you can. 

Your contribution amount has a bigger impact on your retirement savings than the type of account you use.

By the end of this interview, you'll have a better understanding of the factors that go into choosing between a Traditional and Roth 401(k). More importantly, you'll see how this decision fits into the bigger picture of retirement planning and overall financial health.

Timestamps:

Note: Timestamps will vary on individual listening devices based on dynamic advertising run times.

Here are the condensed timestamps and descriptions:

0:00 Introduction

1:46 Katie explains strategy for maximizing retirement savings

3:19 Discuss assumptions behind traditional vs Roth 401(k) decisions

5:54 Compare scenarios of traditional and Roth contributions

8:54 Explore how income affects retirement account choice

13:51 Talk about media's impact on financial perceptions

15:20 Discuss unpredictability of future tax policies

18:03 Explain current state of Social Security funding

21:05 Explore AI's potential impact on future costs

24:41 Discuss how location influences spending habits

28:16 Examine tax implications for high earners

31:12 Talk about effects of stock-based compensation

33:55 Compare incentives for business owners vs employees

36:06 Emphasize importance of contribution amounts

For more information, visit the show notes at https://affordanything.com/episode541

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