Maximizing Tax Benefits with Retirement Contributions

Consider the tax implications when choosing between pre-tax and Roth contributions based on your combined marginal federal and state tax rates. If the tax rate is above 30%, pre-tax contributions may be attractive. For individuals in a no income tax state or with taxable income below 25%, Roth 401k might be more beneficial. If you exceed the income limits for Roth contributions, explore the backdoor Roth or conversion Roth strategy by making non-deductible contributions to a traditional IRA and converting it to a Roth for a tax-free transaction.