Pre-Tax or Roth?

The most common question I get is around whether retirement plan contributions should be made pre-tax or Roth. The true answer to this question is ultimately case-specific, and sometimes more detail oriented than what I'm about to provide. However, I believe making the evaluation based on the following framework is simple and covers most bases.  Below are the tax brackets for the 2023 tax year.

• If you find yourself in the 10 or 12% marginal tax bracket, consider Roth contributions.
• If you find yourself in the 22 or 24% marginal tax bracket, consider both pre-tax and Roth contributions.
• If you find yourself in the 32, 35 or 37% marginal federal tax bracket, consider pre-tax contributions.

Most of us experience different levels of income at different points of a working career, so this becomes a fluid conversation over time. The hope is one experiences the wonderful tax benefits both have to offer, which in addition, will provide more planning opportunities when the transition to withdrawing money from the portfolio occurs.

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^{The content in this article was prepared by the article’s author and is not intended to provide specific advice or recommendations for any individual. Voya Financial Advisors does not endorse its content, and the views expressed may not necessarily reflect those held by Voya Financial Advisors.}