I had an interesting revelation the other day while reflecting on the way I set up my 401(k) at 22.

Making $52,000 per year, my taxable income capped out at the 12% bracket ($52,000 minus the standard deduction), so I opted for the Roth 401(k).

The “revelation” part came in when I started to flesh out the actual drawdown reality of the account as an almost-married person:

Wait, I thought, I contribute to this 401(k) right now while I’m in the “single” tax brackets, but when we start to use it later, we’ll be in the “married filing jointly” tax brackets.

If you’re like, “Yeah, so?,” think about the general advice that we give young people when instructing them how to decide between Roth and Traditional 401(k) contributions:

“Do you think you’ll make more now, or do you think you’ll make more later?”

In other words, do you think your tax rate is higher right now, or do you think it’ll be higher later?

Since most of us are optimists, we think, ‘Well, of course my tax rate will be higher later! I’m on one, strong upward trajectory, baby. All gas, no brakes.”

The flaw, of course, is that this line of thinking implies that it’ll be your future career income that’ll determine your tax rate in retirement, and not the amount that you’re actually using. The reality? The money you sock away in your 401(k) will be taxed as if it, itself, is income, as you use it in retirement. (Here’s another post about why I switched my 401(k) from Roth to Traditional that may lend a little more color here.)

The other important thing to remember about how your 401(k) contributions are taxed if you choose “Roth” is known as the last dollar principle. Your contributions are taxed based on your marginal tax rate, vs. the way your income itself is taxed (which starts at the “bottom” of the brackets and goes up). In other words, you’ll pay your marginal tax rate on your contributions (the highest rate you pay), but when you actually USE the money later, you’ll pay for it as if it’s income — some will be taxed at 10%, some at 12%, so on and so forth.

Keep that in mind for later.

So why does being single or married matter?

The equation I would always do in my head was this:

“Well, I’m making $60,000 now. Do I think we’ll want to use more than $60,000 later? Yeah! There’s two of us. Maybe I should just pay the taxes now so we can use more than $60,000 later and pay less.”

The flaw in this logic might be obvious now:

It’s not apples to apples. Your tax rate that determines how much you pay in taxes on your salary now as a single person is in a less forgiving “bracket” system than the tax rate that’ll determine what you and your spouse pay to use it later.

Let’s do an example

Let’s pretend I make $60,000 per year.

My marginal tax rate is 22%, which means if I max out my 401(k) and opt for Roth, I’ll pay about $4,290 in taxes on that income. Assuming the tax brackets will stay more or less the same when adjusted for inflation over the next few years, let’s say I want to withdraw $80,000 of my 401(k) per year in retirement.

I might look at that and think, “Well, $80,000 > $60,000 – I’m better off paying the taxes now on $60,000 so I don’t have to pay the 22% tax rate on $80,000 of ‘income’ later.”

That sounds like it makes sense, but the logic underlying that sentiment is wrong.

Let’s add the spouse into the picture. Here comes the bride, bitch!

So at some unspecified future retirement date, it’s time to start drawing down on the 401(k).

If I opted for that Roth 401(k), that means I paid $4,290 in tax on each annual $19,500 contribution, right?

So let’s say I’m drawing down $80,000 of “income” in wedded bliss. Remember, in order to use your Traditional 401(k), you have to convert the funds to Roth (that’s just fancy IRS speak for “pay taxes on it”). Those Roth conversions are taxed like earned income, not capital gains, so we have to use “real” tax brackets, not the more forgiving capital gains tax brackets. tiny violin interlude

In order for me to have contributed a full $80,000 during my work years, paying my marginal 22% tax rate on each contribution, I would’ve paid roughly (taxes on $19,500 * 4 in the 22% tax bracket =) $17,160 in taxes.

But think about it:

Now I’m married. A married couple filing jointly only pays a marginal tax rate of 12% on $80,000, not 22% (like a single person would have to pay on $80,000).

That means you paid, as a single person contributing to the 401(k), 22% on your contributions, or roughly $17,000 on $80,000 of “income.”

But if you had used the Traditional 401(k) and contributed $19,500 (tax-deferred) to withdraw later as a married couple, you’d only pay a 12% marginal tax rate on that income as a married person, which is an effective tax of $6,229 (takes into account the standard deduction for married filing jointly). That’s an effective tax rate of 7%, compared to 22%.

This is something to be especially conscious of in the “single contribution” period to your 401(k)

Of course, if you’re already married, it is apples to apples. The tax rates that apply to your 401(k) contributions now while married filing jointly are the same ones (assuming they don’t change) that’ll apply to your drawdown later, so there’s really no need to get creative — but remember, the “last dollar” principle still applies. Your contributions are taxed at your marginal tax rate, while your withdrawals are taxed like income from the “bottom-up,” which will almost definitely lead to a lower effective tax rate. I tend to think the Traditional 401(k) is still the better move since there are proven strategies to access the money tax-free based on current tax code, but I digress.

But if you’re making single contributions now and anticipate being married in the future, the pendulum might swing even more favorably in the direction of Traditional – since the tax rates that would be applied to “Roth” contributions (in order to contribute post-tax money) are higher for singles than married filing jointly.

As a general rule of thumb, I think Roth contributions make sense if you’re in the 12% income bracket. Once you get into the 22% bracket and beyond, I tend to air on the side of, “We’ll figure out how to get it out tax-free later, because I don’t feel like paying 22% on this upfront,” especially if you’re single.

To put it in perspective, a married couple would have to be using (read: spending) $106,150 of their 401(k) money or more per year in order to pay a marginal rate of 22% on their Traditional 401(k) withdrawals (the standard deduction still applies, so you’d have to subtract $25,100 from the total amount withdrawn to get the actual taxable amount, and the married couple isn’t in the 22% bracket until they hit $81,051 of taxable income). Compare that to the fact that a single person begins paying 22% on their 401(k) contributions as soon as they make more than $53,076.

In conclusion

For unmarried women (especially the high earners), I’d say the Traditional 401(k) is likely to be more advantageous if you intend to get married later.

The bottom line is that you’re using married filing jointly tax rates to your advantage during your drawdown, while skirting those pesky “single” taxes by using a pre-tax account in your single earning years.