Analyzing Misconceptions and Strategies for Tax Deferred vs. Roth Contributions

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One common misconception is comparing current marginal tax rate to effective tax rate in retirement, when it should be the blended marginal tax rate considering multiple tax brackets. The decision of contributing pre-tax or Roth should be made based on marginal rates - for every dollar contributing. When evaluating whether to contribute pre-tax or Roth for a particular year, it's crucial to consider the marginal tax rate in the future compared to the current rate, focusing on filling lower tax brackets first with pre-tax contributions and then moving to the top tax brackets.

Today Chris Davin, engineer and self taught master of all things Roth, joins Dr. Dahle on the podcast. For anyone who has ever wanted to get all the way into the Roth weeds, this episode is for you. We talk about Roth IRAs, the Backdoor Roth, the Mega backdoor Roth, Roth conversions, and what all of those things mean. We discuss how to determine if you should be doing pre or post tax contributions and why, and how your taxes and tax rate should be considered when deciding what kind of contribution to make. We start with a 101 level discussion before moving to a 201 level discussion and then diving into the graduate level tips and tricks.

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