Thursday, February 02, 2006

Roth vs Traditional 401(k) Calculator update

I discovered a small error in the spreadsheet posted on 1/29, which has now been corrected. I also refined my model - in the previous spreadsheet, I modeled the creation of a side, taxable account where one would invest the difference (or tax savings amount) that the traditional 401(k) would generate. It makes more sense to stick this amount IN the 401(k) itself, where it will grow tax-free. Unless, of course, one is contributing the maximum -- in which case the amount above the cap must be contributed to a side, taxable account. The spreadsheet has now reflects this more rational behavior.

New version of the 401(k) modeler is here.

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