When I started investing for my retirement, the advice was so heavily in favor of Roth accounts that that’s what I did, but I’ve begun to wonder if I should be contributing to a traditional 401k instead?

I got a new job this year and now make $80k/year. I max out a Roth IRA and contribute 8% of my income to the Roth 401k for a 3% match. My spending is at about $36k/year, so assuming that holds steady, I think my tax rate would be lower in retirement than it is now. So…does it make more sense to avoid the taxes now by contributing to a traditional IRA? Or is there another reason that the Roth is still a better choice?

The correct thing to look at is your current marginal tax rate vs. what you think it will be during retirement. As a first approximation you might assume that your tax rate will be lower if your spending is half your current income, but it really does depend on many things, especially the ACA. If you plan to buy health insurance through the exchange you’ll find that the premium subsidy phase-out acts as a 10-18% tax that sits on top of your standard tax bracket. Factor that, plus your personal estimate of how likely it is we’ll still be using the ACA when you retire, into your guess of what your marginal rate will be during FIRE.

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