Question 1

Why does the Traditional account show taxes owed but Roth doesn't?

Accepted Answer

Traditional 401(k)/IRA contributions go in pre-tax and grow tax-deferred, so every withdrawal in retirement is taxed as ordinary income at your rate at that time. Roth contributions are made with after-tax dollars, so qualified withdrawals in retirement are entirely tax-free — the trade-off is paying tax on the money up front instead of later. For example, a $50,000 Traditional 401(k) withdrawal in retirement taxed at a 22% effective rate would net $39,000 after tax, while the same $50,000 withdrawn from a Roth account would net the full $50,000 tax-free — the difference reflects tax paid at withdrawal versus tax already paid on the original contributions decades earlier.

Question 2

How realistic is the whole life insurance comparison?

Accepted Answer

This calculator does not predict policy cash values, death benefits or loan availability. Enter values from a carrier illustration using the same after-tax premium budget and horizon. Review guaranteed and nonguaranteed values, loan interest, outstanding debt and lapse risk with a licensed professional; blank values remain unestimated.

Question 3

Is Roth always better if I expect to be in a higher tax bracket later?

Accepted Answer

Generally yes — paying tax now at a lower rate and never again at a higher rate is the core case for Roth. But other factors matter too: Roth IRAs have income limits for direct contributions, and diversifying across Traditional, Roth, and taxable accounts gives you more flexibility to manage your tax bracket in retirement by choosing which account to withdraw from each year. For example, someone paying tax at a 12% rate today who expects to be in the 24% bracket by retirement would generally come out ahead with Roth contributions, since they'd otherwise pay tax on that same money at double the rate decades later.

Question 4

What is a "tax-free retirement strategy" using life insurance?

Accepted Answer

Policy loans are debt, not automatically tax-free income. Tax treatment depends on the contract, including modified-endowment status and what happens on lapse, surrender or maturity. Borrowing also incurs interest and can reduce benefits. This calculator displays entered illustration figures only; it does not determine loan sustainability or tax consequences.

Tax-Free Retirement Strategy Calculator

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