Originally Posted by
OpieTaylor
Did you calculate lost investment value from money used to prepay your taxes.
Some people decide to prepay but don’t include the investment opportunity loss of the money they gave the government to do that.
I haven't seen math work out when the taxes used to prepay a Roth are instead invested while the money stays tax deferred.
Biggest problem with funding a Roth is it forces larger growth demands, mediocre returns, creates a mediocre balance which creates mediocre low taxes withdrawals.
It’s a tall order for someone in their 30s, or early 40s to already have a deferred balance so large it can generate 100-140k a year using 4% rule.
Total crapshoot if your prepaying taxes without a deferred balance already greater than 1-2 million.
Assuming an equal amount of money spent both ways, there is no lost investment value because of prepaying taxes. The sole determining factor in Roth vs traditional is marginal rate at time of deposit and marginal rate at withdrawal.
Under 401k rules, Roth actually has a leg up because the money you use to prepay taxes doesn’t count against your limits and you effectively get to “invest” a higher amount.