Originally Posted by
AArdwolf
Is there a point where you should stop paying into your ROTH IRA, or does it always make sense to max it our no matter how much you make?
Roth accounts make the most sense for very low and very high earners. With low income, you are paying very little or zero tax so the money is basically tax-free going in and out. At some point as income increases, traditional IRAs become non-deductible so they are taxed BOTH going in and out, basically giving you a normal brokerage account. If you are over the traditional income limit a Roth becomes the most tax-efficient method for withdrawal. Eventually you will hit the Roth income limit in which case you will need to ‘backdoor’ to get the tax benefit. In general high earners should be maxing their Roth IRA even as their income grows.
Note that the above is in reference to IRAs. The calculus for 401(k) is a little bit different but there are proper strategies for those allocations as well.
TLDR: Most of the time it’s best to max out the Roth, however sometimes prioritizing the traditional may make more sense, but the criteria may be subjective.