Antonia, 27, wants to retire in 15 years. She’s trying to figure out whether to contribute to pre-tax or after-tax retirement accounts.
Most financial advice for 20-somethings that she’s encountered says to contribute to after-tax (Roth) retirement accounts. These articles assume that a 27-year-old will continue earning money for the next 30+ years, presumably escalating into higher tax brackets along the way.
By paying taxes upfront, these articles say, you’ll enjoy 30+ years of compounding gains, which you’ll be able to withdraw tax-exempt.
But what if, like Antonia, you’re only 15 years from retirement? Should you stick with Roth tax treatment? Or is there wisdom in making retirement contributions with pre-tax money?