Lastly, though we have been using effective tax rates throughout this chapter, marginal tax rates are what matter. For example, when you take traditional 401(k) distributions in retirement (as a single person), you pay only 10% on the first $9,875, 12% on the next $9,876 to $40,125, and so forth. This means that if you plan on taking distributions in retirement that would be lower than your current income, then a traditional 401(k) is the way to go.
