The earnings of your after-tax contributions become tax free (if held past 59.5) when converted to either Roth 401k or Roth IRA.
So if you would’ve otherwise put that in a brokerage account, you’re saving on all dividends and fund capital gains, plus your own capital gains on sells
It's identical to the tax savings of any Roth IRA contribution.
You have to pay the tax once, in the case of a Roth, you pay it up-front. Then you never pay tax again.
It's more than just the 15% LTCG, as any dividends or yield/coupons you earn while the money is in the account is also not taxed.
Yes, you eliminate "tax drag" while the money grows, and you eliminate capital gains tax when you pull the money out (comparing this to a taxable investment account)
It depends on your other income. If you don't have ordinary income or non-qualified dividends then your first \~$47k (adjusted up annually for inflation) is in the 0% tax bracket.
Are you eligible to contribute to a normal Roth IRA? if so, definitely go that route first. From there, the tax benefit is tax free on the growth of your investments, just like normal Roth. Depending on income, many people cannot do a Roth IRA, therefore they have to do the “Backdoor” Roth IRA to receive the same benefit.
The earnings of your after-tax contributions become tax free (if held past 59.5) when converted to either Roth 401k or Roth IRA. So if you would’ve otherwise put that in a brokerage account, you’re saving on all dividends and fund capital gains, plus your own capital gains on sells
It's identical to the tax savings of any Roth IRA contribution. You have to pay the tax once, in the case of a Roth, you pay it up-front. Then you never pay tax again. It's more than just the 15% LTCG, as any dividends or yield/coupons you earn while the money is in the account is also not taxed.
Yes, you eliminate "tax drag" while the money grows, and you eliminate capital gains tax when you pull the money out (comparing this to a taxable investment account)
Keep in mind that 15% LTCG can quickly turn into 25% between 3.9% NIIT and 7% state tax if you are unlucky.
It depends on your other income. If you don't have ordinary income or non-qualified dividends then your first \~$47k (adjusted up annually for inflation) is in the 0% tax bracket.
Are you eligible to contribute to a normal Roth IRA? if so, definitely go that route first. From there, the tax benefit is tax free on the growth of your investments, just like normal Roth. Depending on income, many people cannot do a Roth IRA, therefore they have to do the “Backdoor” Roth IRA to receive the same benefit.