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There is no absolute right or wrong to choose Rose IRA or traditional IRA, but you should consider some issues, so that you can make some adjustments to the decision every year.
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Keep in mind that both traditional and Rose 401 (k) retirement benefit plans and IRAs follow the same tax rules. By the way, you should follow the traditional plan to save money. You don’t have to pay the tax of the year when you deposit money. When you retire to withdraw money, you should pay the tax at the current tax rate, just like paying all other deferred taxes. You can’t enjoy tax deduction when you save money in Rose’s retirement account, but you never need to pay tax when you withdraw money after retirement.
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The key principle is to avoid the option of higher taxation. If you think your tax rate this year is higher than when you retired, you can join the traditional retirement plan to save money. On the contrary, if you think your retirement tax rate is higher than this year, you can join the Rose Retirement Plan to save money.
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There is a general rule: If the tax rate is extremely high in that year, for example, you can join the traditional plan to save money if you get a large bonus or enjoy limited stock options. If the tax rate is very low, such as business losses, you are looking for a job or for other reasons, you can join the Rose Plan to save money.
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But in more years, the tax rate will not change significantly. Put your money into two plans separately, and you will have some flexibility when you retire. After retirement, it is unnecessary to pay tax at the tax rate when you withdraw some money from the Rose IRA every year, just as you do from the traditional IRA.
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Of course, some people believe that the increase of US government bonds will cause the current tax rate to rise significantly in the future. If you want to get the same taxable income after retirement, it is wise to invest in Rose IRA to avoid possible tax rate rise.
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On the other hand, although the tax rate may be higher in the future, many people are still unwilling to save a lot of money so that they can receive the same amount of money when they retire as when they work. Maybe that’s the case with you. Even though the tax rate is usually high, your retirement income may make your tax rank lower at that time than it is now.
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For example, many people now pay at the 28% tax level, while many still pay at the 15% tax level. Even though the tax level may be raised from 28% to 31% and 15% to 18%, if your income falls to a low tax level after retirement, you may benefit from the traditional plan, where you pay tax at the rate of 28% during work and 18% after retirement.
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In a word, you should evaluate your personal situation every year to see if there are some factors or circumstances that cause you to adjust your overall strategy. If it is still unclear after evaluation, the safest way is to invest in both plans at the same time.