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The choice between Roth and Traditional retirement accounts revolves around the timing of tax benefits. Traditional contributions are typically made pre-tax (or tax-deductible), which reduces taxable income now and defers tax until withdrawals are taken in retirement. Roth contributions are made with after-tax dollars, meaning you don’t get the immediate deduction but qualified withdrawals are generally tax-free. Which is better depends crucially on your current marginal tax rate versus your expected marginal tax rate in retirement. If you expect to be in a higher bracket later, paying tax now (Roth) can be advantageous; if you expect to be in a lower bracket later, deferring taxes (Traditional) might make more sense.

Other factors also matter: estate planning preferences, the availability of Roth conversions, employer match mechanics (employer contributions to a Traditional 401(k) are typically pre-tax even if your contributions are Roth), and differences in required minimum distributions (Roth IRAs often avoid RMDs that apply to Traditional accounts). Predicting future tax rates is uncertain — tax law and personal income both change — so a common practical approach is to diversify across account types (some Roth, some Traditional) to keep options flexible. But the core teaching is straightforward: the Roth vs Traditional decision hinges on timing expectations for taxes, not a universal “one is always better” rule.

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Dollar-cost averaging reduces timing risk by investing fixed amounts regularly, which smooths out purchase prices over time.

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