This is the infographic from the Fidelity. It exemplifies what's wrong with the financial industry, and the sad state of innumeracy that we are in.
To be clear, Fidelity treats the 401(k) correctly, although the assumption that the withdrawals are all at a marginal 28% is a poor one. The Roth side, they assume the $5000 goes in at a zero tax rate. This is nonsense, as Elaine can't deposit $5000, she has to pay tax first, no? She'd deposit $3600, and would have the identical $27,404 at withdrawal time.
And this is pure nonsense -
"Let’s look at the numbers another way. Tom takes the $1,400 he saved
in taxes from his $5,000 pretax contributions, and invests that money
in a taxable brokerage account. That could boost his total at age 75
The $1400 saved is in his 401(k) already, there's no extra $1400. $5000 went in pretax.
Let me go one more step, and explain what I think Joe meant in his comment below - tax table first -
At retirement, say a couple has exactly $168,850 of income. With the $20K in standard deduction and exemptions, they are right at the top of the 25% bracket.
And have a federal tax bill of $28,925. Overall, an effective rate of 17%.
Of course this is a blend from 0%-25%, and I maintain that if some money could have gone in post tax while in the 10%/15% brackets, that would be great, but in the end, if it all skims off at 25%, and comes out at an effective 17%, that's not too bad.
The article is incorrect. Misleading. And offends any of us that have any respect for numbers. And the fact that the article claim that "87% found this helpful" just makes me... sad.
I've said it elsewhere, and will repeat, there are not just two points in time. The ability to convert Traditional 401(k) to Roth 401(k), and if in IRAs, not just convert, but also recharacterize, opens up other possibilities. It's worth a bit of attention and ongoing paperwork to minimize your lifetime tax bill.
Time makes no difference. There is no "crossover point" as with other financial decisions. For this illustration, the results are identical regardless of time.
By the way, in today's dollars, it would take $4M pretax to produce an annual withdrawal of $160K. This number is about top 2-3%. The 90%ers need not worry about saving their way to a higher tax bracket.