Oh I guess you're more raising the question of whether it is sometimes better to just invest in taxable rather than Traditional since you may end up paying capital gains and qualified dividends in taxable instead of ordinary income rates on withdrawal or Roth conversion from Traditional. I did question that a lot and wondered if I should even open my Solo 401(k) at all or just invest in taxable. But I always ended up figuring that in my situation the Solo 401(k) is better.What I'm saying is that in my case I contributed to Traditional to avoid paying 10-15% in tax and later paid 30%+ when taking the money out. When I took the money out I paid at ordinary income rates while I could have benefitted from capital gains or qualified dividend rates in taxable.I'm not asking about coming out ahead on Traditional vs. Roth. That decision was already made. And I don't even have a choice about this portion of the contributions because in my Solo 401(k) the Employer contributions have to be Traditional. I'm simply comparing how the tax savings from the Traditional contribution, when invested in a taxable account, might grow compared to money invested in a tax-advantaged account.You not necessarily thinking about that correctly. Whether you'll come out ahead depends on your tax rates now vs. in the future. I could have paid taxes on the money I contributed to a tIRA when I was working at a far, far lower rate than I was able to convert at post-retirement, so contributing as much to a tIRA as I did was counter-productive.*I’m assuming that while the money in my tax-advantaged accounts may grow at 7 or 8% over the years, this money invested in taxable may only grow more like 5 or 6% due to tax drag. Am I thinking about that correctly?
But I guess my question wasn't so much about the taxes at withdrawal or conversion but whether my thinking is correct that in taxable you're always going to have some little things along the way that reduce the growth itself. In other words, there's nothing that's completely tax-efficient in taxable whereas in both Roth and Traditional, everything at least grows without being taxed, even if, in Traditional, it is taxed at withdrawal or conversion.
Statistics: Posted by GoldenBear17 — Mon Apr 08, 2024 2:42 am — Replies 5 — Views 305