In part 1 of our five part series on “Why You SHOULD Do a Roth” we introduce Bob and Jane Youtube.
They are both 50 years old. They each make $50 a year. Defer $10k of their salaries to their 401k, their company matches 8% of their salaries.
They expect to get a 7% Rate of Return from now until they reach the age of 60 when they will stop working. They also expect to get a 7% rate of return from 60 -70 when they have to start taking required minimum distributions and then will cut back their “risk” and expect to get 5% returns from there on out.
By deferring into the traditional 401k they save around $2500 a year in taxes which they can invest in a side account, also growing at 7% a year.
Is that the best solution though?
We’ll go over this in depth in this series. So stay tuned!