4 Reasons Pre-Tax Retirement Contributions Beat Roth (especially in peak earning years)‼️

(don’t forget to checkout the video of this blog too)

Roth IRAs are often touted as the superior way to save for retirement.

That’s because a Roth IRA forces you to pay taxes today…

making all distributions in retirement 100% tax-free.

Sounds great, right⁉️

Well hold on just a second. ⚠️

Roth IRA’s can be very valuable for retirement planning, but that doesn’t mean you should immediately shift all of your retirement contributions to Roth…

Here’s why:

✅ Pre-tax Contributions Remove Money from Your Highest Marginal Tax Bracket

This is a HUGE benefit not often recognized for managing the taxes when you take money out (in retirement).

This is especially valuable if you are high income-earner right now.

Pre-tax retirement contributions are 100% tax-deductible, meaning they immediately reduce your taxable income (dollar-for-dollar) in the years that you need it most!

✅ Pre-tax Dollars Are a Tax-timing Vehicle in Retirement

Pre-tax dollars allow you to choose which tax brackets you pull money out in retirement.

This allows you to prioritize the spending your pre-tax retirement dollars in the lowest marginal tax brackets.

This means high income-earners can avoid paying upwards of 30% in taxes on income while working…

To strategically collect that as retirement income paying around 10% or less (if done correctly) in retirement!

✅ The Only Way To Get Triple Tax Benefits for Retirement

Pre-tax dollars are for sure superior to a Roth IRA up to a certain level and here’s why:

One, you can take a tax-deduction in your peak earning years…

Two, You can allow that money to grow completely tax deferred…

And three, you can take at least a portion of it out completely tax-free‼️

Note: You do this by leveraging your standard deduction (and any other tax deductions you may have) to create a dollar-for-dollar offset with your taxable income….

….Turning taxable dollars into a tax-free stream of retirement income!

✅ You can STILL turn this money into Roth IRA money anyways

There are no additional benefits to owning a Roth IRA in retirement (other than tax-free withdrawals).

But you can still do a Roth Conversion in retirement with pre-tax money.

This can help reduce future Required Minimum Distributions (RMDs) by lowering taxable balances ➕ Roth IRA’s themselves are completely exempt from RMDs!

Not to mention a Roth Conversion can be used as part of a Tax-free Wealth Transfer Strategy.

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