Money Meets Medicine Pre-Tax versus Roth Investing
Apr 10, 2024
The podcast discusses the debate between pre-tax and Roth investing, emphasizing the importance of disability insurance and student loan management for doctors. It explores tax optimization strategies, tax efficiency in retirement planning, minimizing taxes on inherited wealth, and strategic asset management to avoid running out of money in the future.
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Taxes Timing Defines Investment Types
- Pre-tax and Roth investing differ mainly in when you pay taxes: now or in the future.
- Roth means paying taxes upfront at a lower bracket, while pre-tax defers taxes until retirement, hoping for a lower bracket then.
Use Pre-Tax Contributions to Lower Student Loans
- Lowering your adjusted gross income (AGI) via pre-tax contributions can reduce student loan payments.
- Contribute enough pre-tax to significantly lower or eliminate student loan payments during training.
Historical Tax Rates Show Uncertainty
- Marginal tax rates have historically varied widely, sometimes reaching up to 90%.
- Future tax rates are uncertain, so hedging between pre-tax and Roth is wise to manage tax risk.