When investing in 401k, say if I put in $100 and the tax should be $25. Because I donโt get taxed until I take the money out. Lets say 10 years later that money grew into $1000 and I take it out. Do I get taxed $250? Or do I get taxed $25?
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comments
Using ur example if u withdraw 20k the first 10k would be 10% and the next 10k would be at the next tax percentage.
$100 taxed today into a Roth @ 25% = $75 to invest => becomes $750 in 10 years = $0 in tax in 10 years
$100 tax-deferred = $100 to invest => becomes $1000 in 10 years = variable tax in that year, likely $250+
The reasons traditional is common are to not pay taxes in current year and hoping or assuming tax will be lower when withdrawn in retirement because no other income.
So please pay or gtfo