Hello, 30M and currently making around 95k in Los Angeles with the intent of living here in California until I die (as expensive as it is, family/girlfriend and everyone I love lives here). I think that information is important when deciding between traditional and Roth 401k and trying to see if my math lines up. I’m very new to investing, but with my current tax bracket, taking $500 a month towards my traditional 401k is equivalent to putting roughly $343 into my Roth 401k. This is under the assumption that I want to chop 500 bucks from my paycheck each month, it’s either 500 bucks with traditional, or 343 with Roth. Over the course of 30 years with an 8% return yearly, that 500 bucks will grow to about 739K and the 343 dollars a month will grow to 507k.
Of course the Roth will be tax free, but the idea of the traditional 401k is that my annual withdrawals at the age of retirement would be much lower and put me in much lower tax bracket compared to my working years. But I’ve also considered the possibility of state and federal taxes being much higher in California in 30 years. I don’t believe the possibility of trump removing federal income tax, and if by some miracle it does happen, it’ll be reinstated by the next presidents after him I’m sure (especially before I’m 60).
Assuming all variables are the same and I won’t retire in a cheaper/income tax free state, does it make sense for me to stay with a traditional or switch to a Roth 401k?