Hi there,
I realize I'm late to the party, but thought I should chime in here anyway. I'm the one who suggested some updates to the CSS that included adding an option for future contributions in estimating future tax rates, and I want to explain why I think this is a good idea.
In general, my approach to financial planning (including tax planning) is to write down a simple but comprehensive plan, and base my decisions off that plan. The plan should include income, expected expenses, location, savings rates, investment performance, etc. These plans should be really simple; in most cases you should assume the future will be like the present, except if you have some reason to think otherwise. As mentioned, certain careers (eg. doctors) have planned changes income, maybe someone is planning to buy a house or move to another state, and these should be included. We all know plans change frequently, so it's foolish to make it too detailed, but it's equally foolish not to plan at all.
Once the plan is written down, then decisions can be made based on it. When can I afford a down payment? When can I retire? Am I likely to owe estate tax? etc. If you assume that future tax rates stay the same as today in real terms (which is what I suggest), then you can also estimate your future tax rate. Future contributions are, mathematically, an important part of that equation. I fully concede that if someone has a very uncertain income, or a terminal cancer diagnosis or something, it may not make sense to include any future contributions. And, of course, if someone is planning on retiring early, then they would only include future contributions for as many years as they plan on working. But many, maybe most, people work normal-ish length careers and make pre-tax contributions along the way. At 20 years out and 5% growth, about one third of someone's future pre-tax balance will come from future contributions. If someone has confidence that they'll work and make these contributions, it should be included for planning. If/when the plans change, then the predicted future tax rate may change too, but at least they made the best decision they could with the information that was available at the time.
Another way to look at it: I have some formal training in analysis, and predictive power is one of the measures of a good analysis method. In other words, if your analysis says that if A, B, C, and D happen, your future tax rate will be X, and then A, B, C, and D do happen, then your future tax rate should be X. So, if you plan to work and contribute to your pre-tax account for another 20 years, and you do, and your investment returns and future tax brackets are as you predict, then your tax rate will be what the analysis predicts. That won't happen unless you include planned future contributions. Excluding them is a bit like deliberately skewing the scope on your rifle 5 degrees to one side- you'll always be on one side of your target, until it's so close that you can hit it without aiming.
I've heard several proposed reasons to exclude future contributions, here and elsewhere. Here are some, and why I don't agree:
Future tax rates are too hard to estimate anyway, so it doesn't matter - I definitely agree future tax rates are very hard to predict. It depends on future tax laws (impossible to predict decades in advance), investment performance (almost as uncertain), and future contributions. But just because it's a difficult problem, doesn't mean we shouldn't try to be as accurate as possible where we can. If someone's plan is to work and contribute for X more years, then those contributions should be included, until the plan changes. And while the uncertainty is very high decades out, the analysis should be repeated every few years, and it will get much more accurate closer to retirement. Estimates ~5 years away from retirement can be made with pretty good accuracy, I'd argue.
As a side note, for purposes of choosing between traditional and Roth contributions, the high uncertainty doesn't necessarily make the problem intractable, even several decades out. Future balances are hard to predict, but it also takes huge changes in future balances to make small changes in tax rates. The difference between a 12% tax rate and 35% is ~10x difference in pre-tax balance. Most schoolteachers can be confident they won't retire with a $15M inflation-adjusted balance in their 403b. And, at the end of the analysis, the tax rate gets compared in a binary fashion to the current tax rate. So, while there is a lot of uncertainty, there's also a lot of tolerance for uncertainty and still getting to the right answer.
Including future contributions is counting your chickens before they hatch - The whole of financial planning is counting your chickens before they hatch, figuring out where you want to be in XX years, and the steps necessary to get there. It's necessarily forward-looking, and this is just one question under that umbrella. In cases where someone's income is uncertain for some reason, it could very well make sense to exclude future contributions, but not generally. Also, while there are plenty of cases where someone's income or contributions unexpectedly goes to 0 (eg. disability), there are also cases where people's income rises dramatically, and prior pre-tax contributions would have been better off made as Roth in hindsight. I don't have data on which case happens more often, but either way I still think making a plan, making decisions based off that plan, then updating the plan as necessary, is the best way to make these decisions.
Most careers don't have big changes in income - This is true, and I wouldn't advise someone to plan on big changes in their income unless they had good reason. But even with completely stable income, excluding future income will introduce a bias. Someone with $500k in pre-tax savings planning to retire in 25 years will underestimate their future balance by 35% (FV(5%,25,-19500,-500000) = $2.62M, FV(5%,25,0,-500000) = $1.69M). That's a big difference that could introduce errors in tax planning going on today.
It's too complex to include future contributions - The Future Value function in Excel ("=FV") and other tools includes an argument for contributions. It's not adding any complexity to set that value to something other than zero. In most cases the value isn't that hard to figure out anyway; it's just the total amount you've been contributing to your pre-tax accounts ($19,500 for many people). A tool that estimates future tax rates should at least have the option for users to put in a non-zero value, in my opinion.
Happy to read any more thoughts on the subject.