Wouldn’t retirement planning be ever so much easier if each of us could see ahead into our individual futures? That’s a loaded question! Of course it would be. And if that were the case, I, for...

Choosing Between a Traditional and a Roth 401(k)

postato da lilyeven12 il 12/06/2018
Categoria: Internet - tags: dental scaling machine

Wouldn’t retirement planning be ever so much easier if each of us could see ahead into our individual futures? That’s a loaded question! Of course it would be. And if that were the case, I, for one, would also be out of a job. However, that is not the reality that we live in implant machine. Therefore, we need to be a bit more analytical, especially when making a decision between a traditional and Roth 401(k). It is necessary to examine if the 401(k) vehicle that you choose is going to build wealth for you and your family or if it will simply line the pockets of the Internal Revenue Service. Betting on the Future As we begin this conversation, I would like to educate you on the realities of both vehicles. Let’s first consider the details surrounding contributions to a traditional 401(k): Pre-tax contributions are deductible from taxable income. The 401(k) grows on a tax-deferred basis. The 401(k) is subject to required minimum distributions when the participant reaches the age of 70 Ultrasonic Scaler.5 years. Withdrawals on both contributions and earnings are fully taxable. A traditional 401(k) must be rolled over first to a traditional IRA, and then it may be converted to a Roth IRA. This process requires a tax payment. Now, let’s do the same for a Roth 401(k): Contributions are subject to federal and state income taxes during the taxable year. There is no age requirement for receiving minimum distributions. Withdrawals of accumulated contributions and earnings aren’t subject to income taxes at retirement. Funds can be rolled over directly to a Roth IRA with no tax payment, a feature that is not available with a traditional 401(k) account. Both the traditional and Roth 401(k) come with a maximum contribution, which was $18,000 in 2016. Those individuals who are 50 years of age or older can make additional “catchup” contributions of up to $6,000 for a total contribution of $24,000, which is definitely more generous than IRA vehicles. However, there are downsides that must be discussed. Traditional 401(k) vehicles offer immediate tax benefits in exchange for future taxable income. A Roth 401(K) offers the opposite, as tax-free retirement income is provided in exchange for taxes today. Therefore, deciding between them comes down to understanding how your future income tax rates will compare with current rates—and which offers a bigger benefit. “You must understand what after-tax cashflow means and make decisions with this in mind,” said Brad McKeiver, CPA, MBA, principal at LBA Haynes Strand, PLLC, in Charlotte, NC. “We like to make sure that clients work closely with a financial advisor so that their planning doesn’t exist in a vacuum and incorporates feedback from their core team—their attorney, CPA, and financial advisor.” Current and Projected Tax Brackets Instead of being fixated on hypothetical situations in the future, let’s focus on what the reality of the present actually is. Start by figuring out your current tax bracket. If you are in the early stages of your dental career, it’s likely that you are in a low tax bracket (20% range or lower). In this regard, a Roth 401(k) is a wise choice as it is likely that your expected tax bracket in retirement will be higher dental scaling machine.