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Rate a Roth 401k retirement account

March 9, 2010

Whether or not to invest into a regular tax-advantaged employer plan and IRA personal accounts versus contributing to “Roth” IRA and tax-advantaged employer plan retirement accounts is not always a straightforward decision.

The decision on the trade offs is one of the very intricate decisions of a lifecycle financial freedom plan. A lot of personal finance issues can decide whether a ordinary IRA or tax-advantaged employer plan account contribution versus a Roth IRA or tax-advantaged employer plan personal account contribution choice would be better.

If analyzed properly, the majority of people would find that making investments into a traditional tax-advantaged employer plan or IRA personal accounts is the better decision, when those contributions would be currently tax deductible.

Over a lifetime the analysis is quite complicated. Simple retirement planning spreadsheets are not sufficient to analyze all the important factors. The decision is not only about tax rate changes. Instead, the decision requires a comprehensive financial projection and valuation of a person’s lifetime income, taxes, and assets.

(Look here for a comprehensive Roth 401k retirement calculator that makes automatic this regular tax-advantaged employer plan or IRA account versus contributing to “Roth” tax-advantaged employer plan or IRA account financial projection.)

Whether or not a family will save enough and invest carefully over their lives is most important in the Roth retirement account versus the “deductible against this years income taxes” regular retirement plan contribution choice.

When a family does not earn a sufficiently high income, cannot control consumption to save a lot, does not dramatically reduce investment expenses, and/or cannot build up a large enough retirement nest egg, then that person will not have to worry about being in high income tax rates when retired — whether or not federal and state tax have moved up or down in the interim. If an investor will not have sufficiently large income and assets when retired, then the present tax savings an investor will get from picking an ordinary retirement plan contribution would work out to be much more financially favorable over a life cycle.

Note: This article ONLY talks about personal financial circumstances where an investor has the choice of making a “deductible against current income taxes” traditional IRA or 401k contribution versus a currently “not tax deductible” Roth IRA or 401k additional investment. When you can’t take the current tax deduction but can make a Roth contribution, then the Roth deposit is more desirable.

A fully automated, do-it-yourself financial planner with a Roth financial calculator is needed to establish a fully personalized family financial strategy

In addition, to develop a really useful plan for your financial freedom demands that you use a high quality personal finance software with a superior investment planner and a superior financial planning tools.

Get a leading do-it-yourself personal financial planning software home software product with the top financial retirement planning program, superior financial budgeting software, and excellent investing calculators for your personally customized lifetime personal finance planning.

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