HSA Recommendations?

[Daniel]

I have an HSA through my employer, and while I understand the basic tax implications, I don't have a good 'strategy' for it other than to max it out. So I have two high-level questions.

a) What's the strategy? Should I pay for expenses out of pocket now because the 'discount' is potentially higher now than in the future (since my tax rate will go down at some point in the future)? Or should I be saving it?

b) Suggestions for good HSA providers? My employer-sponsored plan is through Avidia, which charges $4/month and then $3/month if I want to invest (this gets waived on balances > $3k). However, the investment options have really high expense ratios (~1%).

Thanks!

 

[Matt]

A strategy that many recommend is maxing it out, and if you can afford to, do not draw down from that account for expenses today, rather let it grow for the future. Nonqualified Withdrawals from HSAs after age 65 are penalty free, this means you deduct the contributions today, and pay taxes on the earnings in the future if used in this way. Just the same as an IRA.

By contributing to an HSA you can increase the amount of money that you can allocate to retirement savings.

So, while it may seem illogical, you fund the HSA not with money to set aside for out of pocket expenses, but for your retirement.

Not sure about what providers are best, though it is an interesting topic, if I get a moment I'll look into it.

 

[Sesq]

I fund my HSA and pay my costs out of pocket. Its basically an extra IRA at this point. I also save all my doctor's bills that I paid out of pocket since the rule is you can withdraw tax free in the future for qualified expenses incurred after you funded. It can be an expense from a prior year (as long you had the HSA opened). So if I have a cash crunch in the future I will be able to pull money out without penalty or needing to wait for an eligible expense.

Mine is through HSA bank. Its in cash at the moment, and my fees aren't as bad as yours (like $1 a quarter). I understand you can move it to a provider of your choice and some have vanguard funds. I haven't dug into that as much as I figured I'd let it build up to $10k or so, find a provider, then move the money from the employer sponsored plan to the better provider once a year or so. I am in year two of a family plan, so I am closing in on that 10k. I have seen TD Ameritrade mentioned. I think its a growing area, and kind of like 529 plans as it gets more popular some of the fees should get taken out as more companies move into the space.

 

[Daniel]

A strategy that many recommend is maxing it out, and if you can afford to, do not draw down from that account for expenses today, rather let it grow for the future. Nonqualified Withdrawals from HSAs after age 65 are penalty free, this means you deduct the contributions today, and pay taxes on the earnings in the future if used in this way. Just the same as an IRA.

At that point, why not just max out your 401k? I.e. if you're not planning on utilizing the tax advantage for medical expenses, then wouldn't you be better off increasing your 401k contribution dollar for dollar?

For context, my current personal savings allocation is:

• $5500 in Roth IRA (maxed)
• $14k in 401k +$3k employer match (not maxed)
• $24k in non tax-advantaged accounts
• $3300 in HSA (maxed)

It's hard for me to putting aside any more money into retirement because a) I may have a spouse who presumably would save as well, and b) I'm very young, and I want to save for things like a house, college for my (future) kids, etc. Is this myopic? Obviously, total wealth / lifetime is hurt by not maxing tax advantaged accounts (i.e. 401k), but I have more non-retirement years ahead of me than retirement years. I guess this broadens the initial topic of the thread, but how are others doing it?

 

[sriki]

If you have access to similar investment options as you do in a 401k, this is the order I would do.

1. 401k up to employer match
2. HSA max
3. Remaining 401k limit

With HSA, you can withdraw for qualified medical expenses which one ups 401k (assuming the investment options are sound & not lying as cash)

 

[Daniel]

If you have access to similar investment options as you do in a 401k, this is the order I would do.

1. 401k up to employer match
2. HSA max
3. Remaining 401k limit

With HSA, you can withdraw for qualified medical expenses which one ups 401k (assuming the investment options are sound & not lying as cash)

...the eternal question -- why?

I'll amend 3. with Roth Ira then 401k. For me, the math works such that a Roth IRA will outperform a 401k contribution because I have such large compounding effects. In other words, since I have a ways to go before retirement, I get more out of the lack of tax on capital gains than the lack of tax on the front end. Question still stands though. Why max out the 401k?

 

[thepaul500]

Why not? If you are also maxing out IRA, HSA, etc then its a no-brainer.

18k compounded over 30 years ends up a lot more than 6k over 30 years.

 

[Matt]

At that point, why not just max out your 401k? I.e. if you're not planning on utilizing the tax advantage for medical expenses, then wouldn't you be better off increasing your 401k contribution dollar for dollar?

Why is a 401k better?

Both the 401K and the HSA are tax deferred savings vehicles, so they both do the same thing 'today' to your liability. To think that one is better than the other would come down to examining costs/fees of plans, and overall that would likely be a minor thing.

In terms of characteristics this point by @Sesq is very interesting:

It can be an expense from a prior year (as long you had the HSA opened). So if I have a cash crunch in the future I will be able to pull money out without penalty or needing to wait for an eligible expense.

That means you could just 'want/need' funds in the future and not be restricted by the rules of either a 401k loan or by IRA early withdrawal penalties (if you had rolled it over by then)

For context, my current personal savings allocation is:

• $5500 in Roth IRA (maxed)
• $14k in 401k +$3k employer match (not maxed)
• $24k in non tax-advantaged accounts
• $3300 in HSA (maxed)

The above is your annual savings or total savings? If annual then its looking good! If it is total and you can't decide where to target an amount of money, I can see you wanting to decide between deferred and free (401k/HSA vs Roth).

Also, if you are young, are you done with college or might you return in the future? If you were to become a full time student again your Roth decisions might need rethinking.

Obviously, total wealth / lifetime is hurt by not maxing tax advantaged accounts (i.e. 401k), but I have more non-retirement years ahead of me than retirement years. I guess this broadens the initial topic of the thread, but how are others doing it?

Personally I cycle between tax deferred and rollovers to tax free. I find this levels out my salary and allows me to pay taxes at a rate that I want. Currently I'm paying 1-2% effective tax and have also managed to load up Roths. I expect to earn little in the next few years as I build up a company, so I'm ramming as much as possible into tax free by realizing income now. Should all go to plan and I am successful in the future, I would have already pushed 100% of my retirement accounts into Roths, and will start deferring into SEPs/401Ks again. My goal is zero taxes always.

 

[Daniel]

Why is a 401k better?

Both the 401K and the HSA are tax deferred savings vehicles, so they both do the same thing 'today' to your liability. To think that one is better than the other would come down to examining costs/fees of plans, and overall that would likely be a minor thing.

In terms of characteristics this point by @Sesq is very interesting:



That means you could just 'want/need' funds in the future and not be restricted by the rules of either a 401k loan or by IRA early withdrawal penalties (if you had rolled it over by then)

Sweet. This is what I had coallesced on. The **only** caveat might be if your investment options with the HSA suck and/or the fees are exorbitantly high (which is the case until you've hit some minimum balances) then the math might be different. So I'm thinking that it's worth letting mine sit until I've built up requisite balances (which will take > 1 year b/c HSA limits) and then investing in my employer's plan. Once I leave, then I can roll it over, but it doesn't make sense to do it before then since I incur my employer's fees anyway.

The above is your annual savings or total savings? If annual then its looking good! If it is total and you can't decide where to target an amount of money, I can see you wanting to decide between deferred and free (401k/HSA vs Roth).

Annual. I made a promise to myself that I wouldn't lifestyle inflate, and so I set up a bunch of automatic savings plans/pre-tax deductions to enforce that.

Also, if you are young, are you done with college or might you return in the future? If you were to become a full time student again your Roth decisions might need rethinking.

There is a chance I will. How would this change things? Obviously when I have a lower tax rate it makes even more sense to pile things in Roth, but even now (28% bracket) it is still optimal for me to put the $5500 in a Roth vs in a 401k. Or are you suggesting opening a 529?

Personally I cycle between tax deferred and rollovers to tax free. I find this levels out my salary and allows me to pay taxes at a rate that I want. Currently I'm paying 1-2% effective tax and have also managed to load up Roths. I expect to earn little in the next few years as I build up a company, so I'm ramming as much as possible into tax free by realizing income now. Should all go to plan and I am successful in the future, I would have already pushed 100% of my retirement accounts into Roths, and will start deferring into SEPs/401Ks again. My goal is zero taxes always.

Should I be looking at the "backdoor Roth" post? And what else?


....Note to those just joining -- I hijacked my own thread, but I am also looking for HSA provider recommendations if you happen to have them.

 

[Daniel]

Why not? If you are also maxing out IRA, HSA, etc then its a no-brainer.

18k compounded over 30 years ends up a lot more than 6k over 30 years.

Oh totally agreed. I'm looking at the margin between contributing, say $14k/year versus $18k, since the $4k (despite the taxes) might better serve you before retirement than during.

 

[Matt]

There is a chance I will. How would this change things? Obviously when I have a lower tax rate it makes even more sense to pile things in Roth, but even now (28% bracket) it is still optimal for me to put the $5500 in a Roth vs in a 401k. Or are you suggesting opening a 529?

28% bracket is pretty high. For me, it is an attract bracket to defer from. The key for me wasn't to think of 'how much tax will be in retirement' rather, is there a chance that my tax rate will be lower than that.

The decision to go back to college may well be a financial one (along with lifestyle/goals/desires) so if you focus on that goal and see if tweaking current strategies makes it work, then you might find some interesting territory.

To consider:

What would happen from a wealth perspective if you were to defer today (401k/trad IRA) rather than Roth? You'd keep more money in your pocket, to the tune of 28% at the Federal level. Let's say you do that for 3 years, then go to college. You'd have $16.5K @ 28% 'saved' but you'd have a liability of $16.5K + growth if you want a Roth.

Quit your job (take a sabatical/whatnot) reducing salary to as low as the 10% bracket. Rollover the funds to the Roth, and you just captured the spread as profit. While one could argue that is 3 years of gains, we are really only talking about 1yr1 day to load 3yrs of contributions. More realistically, a year and a few months....

If you use the 401k then it must allow for partial rollovers, or you must have the capacity to rollover everything and afford the taxbill. Partials are VERY attractive. IRAs allow Partial rollovers.

For the 529, certainly an option, but it depends on the value you gain from that in your own state, as some offer value whereas others don't.

 

[haserfauld]

I have a long way to go and a lot to learn on this subject. I'm sure I'm not maximizing options, but I've been doing something, which is better than nothing!

I work for a smaller company that does not offer matching on my 401k. I worked for a major bank for 4 years during and straight out of college, 3 of which I was eligible for matching on my 401k (up to 6%). I contributed 12% (50/50 Roth/Traditional), and received matching on it. However, my income was relatively low, so that wasn't a huge investment. I'm now married and making double what I was (and household is triple what it was), and I'm trying to figure out my best savings plan.

Right now, I'm dumping about 25% of take-home into various liquid savings accounts @ 1%, the bulk of which (65%) is going to the emergency fund and house down payment accounts. About 40% of take-home goes to rent and utilities (power/water/electric/internet/phone)...the joys of renting in Southern California. 5% goes to a medical bill that will be paid off in June, and then those funds will go to savings. 10% is going to my father to repay an interest-free loan when I needed to replace my car last year. That should be done in about a year, at which point that 10% will move to the down-payment account, making our savings contributions about 40% of our take-home. I also contribute 8% post-tax/pre-take-home to my 401k (Roth, obviously), which is, as mentioned, unmatched. I utilize an FSA plan through work, but that's just $1K/year, which we use (all of) for chiropractic/massage services.

I'm only 27 and my wife is 22, but we've tried to set up aggressive savings so that we will be in a position to buy a home within the next 3 years. Starting in June, my work is looking to add an HSA offering, which is why this thread caught my eye.

I'm absolutely certain there are better things I could be doing, and the HSA is probably going to be one of them. I've elected to contribute solely to a Roth account because of the tax bracket now vs. tax bracket later discussion.

 

[Matt]

I utilize an FSA plan through work, but that's just $1K/year, which we use (all of) for chiropractic/massage services.

I'm only 27 and my wife is 22, but we've tried to set up aggressive savings so that we will be in a position to buy a home within the next 3 years. Starting in June, my work is looking to add an HSA offering, which is why this thread caught my eye.

I believe that there is a conflict between HSA/FSA participation. If you were to get the HSA then your FSA would have to be 'limited purpose fsa' which covers dental and vision, but not sure about the Chiro... and furthermore may not be offered by your employer.

 

[haserfauld]

I believe that there is a conflict between HSA/FSA participation. If you were to get the HSA then your FSA would have to be 'limited purpose fsa' which covers dental and vision, but not sure about the Chiro... and furthermore may not be offered by your employer.

If that turns out to be the case, I will need to decide which route to go. I love the discussion and I definitely need to learn a lot more. I would be interested in starting/joining a conversation discussing different ESA/FSA/HSA/IRA/401k thoughts and recommendations that included a bit more specific personal and financial information (that I would rather not have on a public forum, since I'm easily identifiable), if anyone else is as well.

 

[Sesq]

At that point, why not just max out your 401k? I.e. if you're not planning on utilizing the tax advantage for medical expenses, then wouldn't you be better off increasing your 401k contribution dollar for dollar?

HSA has a few advantages in addition to the one I noted above about saving receipts and being able to draw in the future for past years. This can give a diversification of sources of cash separate from 401(k) loans, original contributions (not earnings) from Roth IRA's or (gasp) hardship distributions.

These benefits are:
-HSA contributions (made through the typical salary reduction plan) reduce your SS wages (only matters if you are below the cap).
-HSA contributions (made through the typical salary reduction plan) reduce your medicare wages (no cap, always matters)
-Certain states don't recognize 401(k) contributions (traditional) as reducing state wages (like PA where I live), HSA contributions do count.
EDIT - and duh, tax deductible contributions, tax free growth if used for medical expenses.

In general, when thinking of savings, with exceptions the basic idea is:
-401(k) to match
-HSA to max
-toss up Roth IRA to max or 401(k) to max
-backdoor mega Roth (if you can, employer need to allow after tax contributions and in-service withdrawals) to max
- other tax advantage accounts (e.g. 529 or Coverdale) if that matches your savings goals
-taxable

This assumes you have an emergency fund and don't have a near term savings goal like a down payment or major purchase. Stock purchase plans or government employees could add another wrinkle.

 

[Sesq]

I believe that there is a conflict between HSA/FSA participation. If you were to get the HSA then your FSA would have to be 'limited purpose fsa' which covers dental and vision, but not sure about the Chiro... and furthermore may not be offered by your employer.

That is correct, and its relatively rare for an employer to offer the limited purpose FSA (dental/vision). I request my employer to add it every year during open enrollment. Never happens. Chiro wouldn't match dental or vision.

 

[Daniel]

To consider:

What would happen from a wealth perspective if you were to defer today (401k/trad IRA) rather than Roth? You'd keep more money in your pocket, to the tune of 28% at the Federal level. Let's say you do that for 3 years, then go to college. You'd have $16.5K @ 28% 'saved' but you'd have a liability of $16.5K + growth if you want a Roth.

Quit your job (take a sabatical/whatnot) reducing salary to as low as the 10% bracket. Rollover the funds to the Roth, and you just captured the spread as profit. While one could argue that is 3 years of gains, we are really only talking about 1yr1 day to load 3yrs of contributions. More realistically, a year and a few months....

If you use the 401k then it must allow for partial rollovers, or you must have the capacity to rollover everything and afford the taxbill. Partials are VERY attractive. IRAs allow Partial rollovers.

Do I have this right?

Even if my 401k doesn't allow partial rollovers, as long as I am employed I might as well max it out as opposed to creating my own (non-Roth) IRA. This is because my tax rate will be the same as long as I am eligible to contribute to it. Once I stop being employed by my current employer I could then roll it completely into an IRA, from where I could do the backdoor rollover into the Roth at the new lower rate.

 

[Matt]

Do I have this right?

Even if my 401k doesn't allow partial rollovers, as long as I am employed I might as well max it out as opposed to creating my own (non-Roth) IRA. This is because my tax rate will be the same as long as I am eligible to contribute to it. Once I stop being employed by my current employer I could then roll it completely into an IRA, from where I could do the backdoor rollover into the Roth at the new lower rate.

Not quite:

There's no tax advantage between the 401k and 'non roth' I'm suggesting looking at 401k and 'roth'.

The rollover after employment is not a Backdoor roth, that is something else. This is just a regular rollover.

The backdoor angle comes in when you earn to much to Roth today.

 

[Daniel]

Not quite:

There's no tax advantage between the 401k and 'non roth' I'm suggesting looking at 401k and 'roth'.

The rollover after employment is not a Backdoor roth, that is something else. This is just a regular rollover.

The backdoor angle comes in when you earn to much to Roth today.

Sorry, let me rephrase my question.

Let's say in 5 years from now I am unemployed (and therefore my tax bracket is zero). Let's also assume that I have converted my employer 401k to an IRA. At that point can I convert $5500 of that to the Roth IRA (paying the taxes on that money, which would be minimal)?

 

[Sesq]

Sorry, let me rephrase my question.

Let's say in 5 years from now I am unemployed (and therefore my tax bracket is zero). Let's also assume that I have converted my employer 401k to an IRA. At that point can I convert $5500 of that to the Roth IRA (paying the taxes on that money, which would be minimal)?

If you are funding a traditional (tax deferred) 401(k). Fund it say $50k in 5 years. Then are unemployed, you could convert $1 or all $50k. Wouldn't have to be in 5.5k chunks. Many do this up to the 15% bracket in early retirement.

 

[Daniel]

If you are funding a traditional (tax deferred) 401(k). Fund it say $50k in 5 years. Then are unemployed, you could convert $1 or all $50k. Wouldn't have to be in 5.5k chunks. Many do this up to the 15% bracket in early retirement.

The conclusion being that if I had the option between contributing 5.5k to a tax deferred IRA or 5.5k to a Roth, AND I expected my tax bracket to go down in 5 years, I should put it in the tax deferred account?

 

[Matt]

Sorry, let me rephrase my question.

Let's say in 5 years from now I am unemployed (and therefore my tax bracket is zero). Let's also assume that I have converted my employer 401k to an IRA. At that point can I convert $5500 of that to the Roth IRA (paying the taxes on that money, which would be minimal)?

Yep you'd be able to use what you convert to increase your salary high enough to claim your deductions (which drops the tax owed back down again) and any tax due would be from the lowest braclet (10% right now).

It's basically what I'm doing but im paying the de minimis salary in order to qualify for SSI credits.

 

[Daniel]

I love this community.

/sidebar

 

[Matt]

The conclusion being that if I had the option between contributing 5.5k to a tax deferred IRA or 5.5k to a Roth, AND I expected my tax bracket to go down in 5 years, I should put it in the tax deferred account?

Exactly. That's the big thing people miss when deciding between Roth/Traditional or more accurately deferred or not. People try to make a calculation based on where they will be 20 to 40+ years from today... once you learn it can be flipped every other year, you can start creating an interesting lifestyle. That can escalate with other vehicles - EG a C- Corp could pay taxes at corp rates, and then later pay salary, so you can defer with a C-Corp and use the accumulated money to pay you in years that you aren't doing rollovers....

It gets a bit wild.

 

[Stuck in KC]

Not trying to hijack your thread but I have a bit of a question...I have had a health savings account for three years. Have about 23K in it. It is at a local bank, United Missouri Bank. Effective July 1st, I will have a 459b or a 457b ( not sure which is correct) and will be using it instead of my health savings account. Does the max amount for it include my employer contributions to my retirement or is it an entirely separate amount?? Most of my coworkers are younger, dealing with school loans, first homes, new babies so have minimal sounding board availability and when I called HR she read me exactly what her booklet said but didn't have a clue what any of it meant....

 

[Matt]

Not trying to hijack your thread but

I'm unfamiliar with the 459b, if you have a 457(b) then it is a deferral method similar to a 401L(k).

Noteworthy: It does not count against your contribution limit, therefore if you put $18K into the 401(k) you could still fund the 457(b). The limits for both are the same, 18+6K catchup if over 50, so you could defer 36-48K based on your age. I believe there is an additional 'boosted' catch up for this plan if you are within 3 years of retirement.

Word of warning: there is a difference between a government 457 plan and a non government 457 plan. You see these plans arising in hospitals frequently as they can help lower high income salaries. The non-gov ones can still be 'ok' but aren't as good as govt ones as they will have rollover restrictions - this means that you would need to be OK with keeping your money in the plan until you actually withdraw it (the key here is to look at what fees you must suck up on the investment options).

I'm a bit rusty on this, but I think the plans to watch out for are categorized as 457(f) rather than (b)

 

[Sesq]

A 457 plan is unrelated to an HSA. It is a retirement savings plan comparable to a 401(k). Unlike a 401(k), a 457 plan can be funded in addition to a 403(b) plan, thus allowing the potential funding of an additional $18k per year. I believe the 457 plans have less protection if the plan itself goes bankrupt, but my knowledge is limited since I have never had the chance to fund one. Also, watch out for the expenses in these plans the 403b/457 government plans are rife with annuties and high fee sales folks working their trade.

Not to refer out to another forum, but bogleheads have some nice resources on these topics:

http://www.bogleheads.org/wiki/457(b)

http://www.bogleheads.org/wiki/Employer_retirement_plans_overview

And on topic (with some provider resources)

https://www.bogleheads.org/wiki/Health_savings_account

 

[seven-up]

Could someone point me in the direction of a company that would administer a 403b and 457b together? My hospital is currently using valic. Every other conpany I have tried to get a quote from tries to convince me that what we are doing is illegal.

 

[Stuck in KC]

I realize the HSA and the 457b are not the same thing. They threw us the 457b to stop all the complaining after they announced the HSA is going away. Trying to sell us that Valic is a good deal which I think it is for them, with lower fees for THEM than vanguard, but much fewer choices of investments for the employees. I do work at a hospital but do not work for the hospital and the state of Kansas until July 1. I am lunching with an accountant today so hopefully will have this all figured out in the next few days. Also downsized my fantastic insurance coverage immensely (very important, as I have a chronically ill child). So, still don't know which plan it is b/c it is a hospital but also the state...

 

[Andres]

Regarding HSA custodians, it depends on how much $ you have in the account. HSA Bank does offer a Self Directed Investment Account (through TD Ameritrade), but you need like $5,000+ for the account to be fee free. I would go with HSA Bank if I had more than $6,000 on the HSA (as your investments might fluctuate below $5,000 if you open with a balance close to $5,000, and incur in about $6/month fees).

If you are starting out (meaning you have a small balance), then go with a fee free HSA custodian. I like Alliant CU. Once you build up enough assets, you can do a trustee-to-trustee transfer to HSA Bank (assuming that they still are the best option). Hopefully this type of accounts gets more competition, and better custodians with lower fees. The investments are the "must have" for these accounts. As suggested above, use it as an extra IRA (it is better than an IRA since you can withdraw tax free if you use the funds for medical expenses, which clearly you will have lots of once you retire and get old). But you need a High Deductible Health Plan, which isn't for everyone. If you are a healthy person, then his is for you. If you have lots of medical problems, then, even with all these tax advantages, this might not be the best play for you.

I recommend this FWF Thread for all your HSA questions and to keep up to date on the best HSA custodians in the market:

http://www.fatwallet(dot)com/forums/finance/542257/

 

[Daniel]

Thanks for the tips. Follow up question - - is the HSA allowed to outlive your participation in a HDHP? As in, what happens if I decide to switch back to a normal PTO in 5 years? Do I lose the ability to draw on the HSA/do I have to cancel it?

 

[Daniel]

Answered my own question - - you can keep it forever and use the funds whenever.

Source

 

[LearnMS]

I can invest in stocks using my HSA plan. I invested 4k in vanguard index fund few months ago. It's now 3.5k....

should think long-term

 

[AndyP]

...the eternal question -- why?

I'll amend 3. with Roth Ira then 401k. For me, the math works such that a Roth IRA will outperform a 401k contribution because I have such large compounding effects. In other words, since I have a ways to go before retirement, I get more out of the lack of tax on capital gains than the lack of tax on the front end. Question still stands though. Why max out the 401k?

EDIT: I should have read. Looks like this already got discussed. It's why even though I expect my tax rates generally to go up over most of my life, I still put some money in a deferred account so that I can convert if I ever take a year off of working.


Not sure this logic holds. It solely depends on current vs future marginal tax rates if I understand correctly.

If my marginal tax rate is 30% I can put either $1000 in traditional or $700 in roth.

Compounded at 8% for 40 years the Traditional account would hold 21,724 while the roth would hold only 15,207. Now I don't have to pay taxes on the Roth. But if my marginal tax rate is anything less than 30% in retirement, the traditional account is more valuable (70% of 21,724 = 15,207).

It sounds like you are maxing out your roth but not maxing out your traditional 401k. If you expect a lower marginal tax rate in retirement you may be better off maxing out the traditional instead. Of course, you can never know so far in advance what your marginal tax rate in retirement will be, so diversity is good and some funds in Roth be acceptable.

 

[redbirdsj]

Agree with AndyP's analysis. There is no mathematical difference between expected portfolio values of traditional v. Roth (net of taxes) if marginal tax rate now and at withdrawal are the same.

However, that's only part of the analysis when deciding whether to contribute to Roth v. traditional. The others that I can think of are:

• As mentioned, if you expect your marginal tax rate to be lower at any point in the future (not just retirement due to the ability to do unlimited conversions), you are likely better of contributing to a traditional.
• Roth IRAs are better estate planning tools. There are no minimum distributions at age 70.5 so the assets can grow tax-free longer prior to being inherited by the beneficiaries.
• Roth IRAs are more accessible. Direct contributions can always be withdrawn penalty-free. Converted basis can be withdrawn after a 5 year period.
• Holding assets in a traditional IRA make the backdoor Roth method a taxable event due to the pro rata rule on conversions. This can reduce your tax-advantaged space if you later have higher income and can no longer deduct tIRA contributions or make direct Roth contributions.