I kind of misspoke. Here are the current rules. In my case i couldn't do an IRA because of the income limits.

Specific rules apply to Traditional and Roth IRAs.
For Traditional IRAs, the ability to deduct contributions may be limited if your income exceeds certain thresholds, especially if you or your spouse is covered by a retirement plan at work. For Roth IRAs, there are income limits for both single and joint filers to contribute the full amount, according to the IRS.

While there's no income limit to contribute to a traditional IRA, your ability to deduct contributions from your income for tax purposes is phased out at certain income levels, especially if you or your spouse are covered by an employer-sponsored retirement plan.

Yes, IRA contributions and deductions are phased out at certain income levels, primarily affecting Roth IRA contributions and traditional IRA deductions for those covered by workplace retirement plans. For Roth IRAs, income limits exist to make them more accessible to middle and low-income earners, while traditional IRA deductions are restricted for higher-income individuals covered by employer-sponsored plans.
Roth IRA Contributions:
Single Filers:
To make a full contribution of $7,000 (or $8,000 if 50 or older), your modified adjusted gross income (MAGI) must be less than $150,000.
Married Filing Jointly:
The full contribution limit applies if your MAGI is less than $236,000.
Phase-out Range:
Single filers with MAGI between $150,000 and $165,000 and married couples filing jointly with MAGI between $236,000 and $246,000 can contribute a reduced amount.
No Contribution:
Single filers with MAGI of $165,000 or more and married couples filing jointly with MAGI of $246,000 or more cannot contribute to a Roth IRA.
Traditional IRA Deductions:
Covered by a Workplace Retirement Plan:
If you are covered by a retirement plan at work, your ability to deduct traditional IRA contributions is limited based on your income.
Single Filers:
For those covered by a workplace plan, deductions are phased out if your MAGI is between $79,000 and $89,000.
Married Filing Jointly:
If you are covered by a workplace plan and your spouse is not, deductions are phased out if your MAGI is between $126,000 and $146,000. If you are not covered by a workplace plan but your spouse is, the deduction is phased out if your MAGI is between $236,000 and $246,000.

https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000

The information you need is on that web site. But, I need a Philadelphia Lawer to understand it.

A few things you said I hear a lot and are ofter found to be wrong for many. Myself included used to say the same things you are then I ran the #s. Mainly a lot of people that save and invest well end up having more income when they retire than they made when working. They end up having their ss taxed and paying thousand more for the old people health insurance because of their income level. They don't get better coverage just have to pay more for the same coverage. Not true for everyone but happens more than you would think.



That's a big advantage of Roths for those that save and invest in assets. They don't count as income for taxes and won't effect your tax rate when making withdrawal and there are a lot of little things like this often over looked that cost people when they retire and it to late to change it.

living better in retirement and having more than people made working is very possible and happens more than I would have thought.


Do you think tax rates will stay the same or are likely to increase in the future with increased debt.. Tax rates are historically very low now. they may and are likely to be raised in the future and that is often over looked.

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A few things you said I hear a lot and are ofter found to be wrong for many. Myself included used to say the same things you are then I ran the #s. Mainly a lot of people that save and invest well end up having more income when they retire than they made when working. They end up having their ss taxed and paying thousand more for the old people health insurance because of their income level. They don't get better coverage just have to pay more for the same coverage. Not true for everyone but happens more than you would think.



That's a big advantage of Roths for those that save and invest in assets. They don't count as income for taxes and won't effect your tax rate when making withdrawal and there are a lot of little things like this often over looked that cost people when they retire and it to late to change it.

living better in retirement and having more than people made working is very possible and happens more than I would have thought.


Do you think tax rates will stay the same or are likely to increase in the future with increased debt.. Tax rates are historically very low now. they may and are likely to be raised in the future and that is often over looked.





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something that I'll never believe "the government created ROTH's to save the tax payer money". We can only estimate future taxes & returns. For me legally paying the least amount of taxes is my goal. I have a W2 job and my wife does consulting work. She started a SEP IRA this year and saved $20,000 in IRS taxes. We hope that that 20,000 invested will more than pay it's way if it is ever pulled out of the IRA.

I don't need my investments to pay for anything I want. I have paid income tax on SS for the past 14 years. Everytime they give a COL increase they raise my medicare payment and my SS check has been getting smaller for the past five or six years. For my RMD's I just pay the taxes & roll the money into a different brokerage account. Barring an unforeseen illness I'll probably never pull money out of my IRA's. Well, I did pull some out last year to buy a lake side cabin in northern Maine.

News Flash from 1997

"Bill Clinton signs ROTH IRA's into law to save the taxpayers money"

BTW, I had a ROTH and once I understood it i stopped contributing to it. At some point I cashed it out when I wanted a new truck or something.

Everyones situation is different. And I stand by my statement often people find they are earning more retired than they were working and don't go down in tax brackets like they thought they would.

With your wife's consulting business she should be able to get some nice tax breaks.

In my case I want to save more than allowed in my retirement accounts. In my Roth 401 I put in the same 23k last year . But I put it in Roth 401 and paid the taxes before so that 23k and all it's growth stays mine. Had I don't that pre tax the taxes would be taken out of the 23k and the future growth. In this case I'm saving more in that account. Sure I could have just not paid the taxes now and put the savings into a Taxable brokerage account or into a Roth. But I had already maxed out roths for the wife and I in addition to putting the max after tax into the 401 that doesn't count against the 23k limit (23,500) in 2025 for under 50.

I also I get enough deductions form the business and kids that running the #s I will.be ahead with a Roth. Or maybe I just like to know for sure what I'm going to have and don't like the unknown of what future tax rates will go up to.

Sounds like you have a great plan that works well for you.

"Federal - 1997 Married Filing Jointly Tax Brackets
Tax Bracket Tax Rate
$0.00+ 15%
$42,350.00+ 28%
$102,300.00+ 31%
$155,950.00+ 36%
$278,450.00+ 40%"

In the 90's it would have been not too difficult to end up in the 28% bracket. I think I would have gambled on paying deferred taxes.

P.S. I don't even want to think how this would work out with the time value of money.

If you think the tax bracket you will be in when you are retired will be the same as the one you are in now or higher buying ROTHs makes sense.
In current times tax rates and brackets are much lower then even a few decades ago but incomes are significantly higher for millions of tax payers.

Bryce

I don't disagree that tax rates might go up and I might be in a higher tax bracket when I pull the money out. BUT:

My point is this: If you are in the 24% tax bracket to Roth $10,000 you need to earn $12,400

to IRA or 401k the same $10,000 is tax deferred therefor only costing you $7,600

So to ROTH you need to spend an extra $4,800 to Roth $10,000

You will never recover that lost $4,800

To be fair with understanding this, take that lost $4,900 and invest it. Now you have $14,800 working for you compared to the ROTH of $10,000

Lets go out 20 years @ 8% per year (S&P long term average)

ROTH would be worth $46,609.57 no taxes owed.

IRA or 401k would be worth $68,982.17 taxable when pulled from the account.

The IRA or 401k is worth 48% more that the ROTH.

Current tax rate is 24% if you earn less than $383,900

So .....

After 20 years with a ROTH I would have $46,609.57 to spend

After 20 years with an IRA or 401k I would need to pay $16,555.72 in taxes leaving me $52,426.45

Roth or IRA/401k it is your call but i would sooner have the extra $5,816.88 to spend. Yes, I paid $16,555.72 in taxes & you Rothers only paid $2,400 in taxes. BUT I have an extra $5,800 in my pocket. That is the effect of compound interest & that is why the government wants your money NOW.

Remember the government is trying to lower you tax burden. NOT

your math is flawed. You fail to account that we have marginal tax rates and are figuring your % across the board.

The younger you are the more advantage of doing ROTHs are. More likely lower tax bracket so less costly to use ROTH and a very long growth time period.

Bryce

My math is not flawed. I am in the 35% tax bracket now and probably will make less than $383,900 (24% bracket) when I start pulling money out.

Actually, my numbers are flawed:

I do $31,000 into a 401k & save $10,850 in taxes. If I would put that same $31,000 into a roth it would cost me $41,850. I'm actually saving $21,700 each year by not Rothing. That $21,700 invested will more than pay the income tax when money is pulled out. I will definitely be in a lower tax bracket when/if I start pulling money. I know, RMD. I do have to pay tax on that every year.

Also have up to 10 years of tax free growth on the account after you die when you leave it to your kids/grand kids if they choose to leave it in the account and that will effectively double the amount with tax free growth during that time.

IMO, incorrect.

Consider this: Individual Retirement Accounts (IRAs) were first introduced in 1974. From that point on the government lost tax revenue. In 1998 (24 years later) they created ROTH's to recover some of the tax revenue they were losing. Run real numbers and you will prove that ROTH's are not the best.

My fear of a Roth is they can change the law any time. Don't think they won't consider taxing them if necessary

Good point. I'm sure it gets talked about. I wouldn't put anything by those that want to tax unrealized capital gains.

They were trying to implement an unrealized gains tax...imagine what that would do to the stock market

After getting everybody worked up over the “losses”, they’ll slide that right in their brains and folks will be all for it.

Or the grand scheme to replace income taxes with tariffs. So much for income tax free or deferred. You get taxed with the new tax.