Author Topic: Should "no state income tax" affect my investing?  (Read 1572 times)

Will

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Should "no state income tax" affect my investing?
« on: July 28, 2012, 08:14:58 AM »
I have to go in to work soon, but I was wondering last night as I was falling asleep, should the fact that I am working in a state that has no income tax affect if I put money into a Roth or Traditional IRA or any other investment?  I was tired and fell asleep before coming to a conclusion, so I thought I'd throw this out there and see what this wonderful community has to say.  Thanks in advance!

grantmeaname

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Re: Should "no state income tax" affect my investing?
« Reply #1 on: July 28, 2012, 09:14:13 AM »
If you're retiring to the same state, it doesn't matter. If you're retiring to a different state, it only matters if it swings your income dramatically from your working career to your retired life.

The typical advice for choosing Roth vs. Traditional IRAs (and 401ks) is that barring odd tax rules, you should invest in a Traditional IRA if your effective retirement tax rate is less than your marginal working tax rate. When you're calculating both those numbers, you should include state and local income taxes as well as your federal income tax.