The growth isn't tax free either. It is tax deferred. Everything you earn in it will be taxed upon withdrawal. That isn't tax free, by any measure.
There is NO portion of the earnings that will not be taxed as income. Juts because you don't pay annual taxes on it doesn't make it tax free.
Every penny in a 401k is taxable upon withdrawal. How is any of that tax free growth?? Mathematically you are simply wrong, and the previous examples have shown that.
Every definition of a 401k lists the earning as tax deferred. Why is yours different?
Even the initial deposit isn't tax free. It will be taxed as income later (hence deferred), at whatever rate you are. Do YOU have a crystal ball to know that your rates will be lower, obviously not.
The initial Roth deposit is taxed and the growth is truly tax free.
No one knows which scenario is better until they get there. I prefer a more balanced approach that leaves me several options.
Last edited by twilk; 03-24-2012 at 04:32 PM.
Front loading can also make sense if your effective tax rate is low now. My effective federal rate is below 10% now due to mortgage deductions, 401k deductions, HSA contributions (also tax free), property taxes ect...
Most of those deductions will be lost by retirement age but my income projections based on current saving levels is likely to go up. There is a very real chance that my tax rate will be higher so a Roth absolutely makes more sense if that scenario plays out.
I'm glad you are happy with the strategy you are using, but to say a Roth doesn't make sense isn't taking into account an awful lot of other factors.
There aren't too many ways you can invest after tax dollars and never be taxed on those gains other than a Roth IRA.