401k or roth 401k or both reddit

For quick trivia: The Roth accounts are named for this guy, the Delaware Senator who created the Roth IRA in 1997.. Roth 401(k)s vs. Roth IRAs. That’s what we do. That’s a big difference. Even though they don’t have much time left, they … Anyone have words of wisdom Thanks. Retirement. While contributions made to a Roth IRA are made after-tax, contributions to a 401(k) are made pre-tax — but you’ll pay taxes either way. What would you guys recommend or any pointers. Traditional 401(k) or Roth 401(k)? The chief advantage to a Roth IRA over any other retirement plan, is the ability to withdraw the principal at any date without incurring tax penalties. A major benefit of having both Traditional and Roth 401(k) assets is you may be able to take advantage of the marginal income tax rate system during your retirement years, which I … You'll owe about $7k in federal taxes, then contribute $5500 to a Roth IRA and you're left with about $37k post-tax for spending. A 401(k) is one of the best ways to save for retirement, but there's more than one type of employer-sponsored retirement account and knowing the differences can give you more options in the long run. Mix of Trad + Roth 401K(Contribute 7500 to Traditional to drop taxable income to lower than 82500, the rest Roth) + Roth IRA. Depending on how much room is in your budget for retirement saving after you have maxed out the employer match on your 401k, you should max out the $5000 annual Roth IRA contribution. Should I use a RoboAdvisor or a Roth 401k? ". For quick trivia: The Roth accounts are named for this guy, the Delaware Senator who created the Roth IRA in 1997.. Roth 401(k)s vs. Roth IRAs. for a single person today, it's not until you push past 9525 for the 0% bracket plus the standard deduction of 12000, totaling $21,525 before you get taxed at all. Both 401ks and IRAs can be Roth or traditional. I am trying to figure out which makes more sense at my age. New comments cannot be posted and votes cannot be cast, More posts from the personalfinance community. A Roth 401k will likely make you richer than a traditional 401k and is one of the best investment decisions you can make as a younger investor in your 20’s or 30’s because of the tax-free withdrawal advantages given an uncertain future. Here is the graph of the 401(k) vs Roth IRA. Your employer is giving you free money! 1 21. facebook twitter reddit hacker news link. Many 401k plan participants have the option of making pre-tax 401k contributions and Roth 401k after-tax contributions. Both of these are tax-advantaged retirement accounts, but there are differences. Here's why Suze Orman says it's better to invest your retirement savings in a Roth 401K if you can. That’s what I thought too. For example, if you contribute 15% of your salary to a 401k plan, maybe make 10% Roth … You should contribute to both right now, 401k and IRA (roth or traditional). Rolled a 401K (which included BOTH pre-tax and after-tax contributions) to Fidelity. However, it’s a lot of money when you’re starting out. because of your job, the dollar put into a roth is taxed at marginal rate, 22% in this case. If your employer offers both Traditional and Roth 401K, you can contribute money to both the Traditional and the Roth as long as the sum of the two does not exceed the 401K contribution limit. We’re focusing on comparing Roth 401(k)s and traditional 401(k)s, but how does the Roth 401k differ from the Roth IRA, every blogger’s favorite retirement account?The big points are highlighted on the chart … Do you make traditional or Roth contributions to 401k, and why? What they found is important in determining a contribution strategy for participants with the option of making both Roth 401k and traditional pre-tax 401k contributions. 0 17. facebook twitter reddit hacker news link. Yes it does, you can contribute $6500 to an IRA if you are 50 or older. The Roth IRA has a couple downsides compared to a Roth 401k, mainly because an IRA has a much smaller contribution limit ($5,500 compared to $18,000). Please contact the moderators of this subreddit if you have any questions or concerns. It largely depends on eligibility for ROTH IRA. However, the 401k has catch-up provisions while the Roth doesn't. If it is a Roth 401k, I would not be taxed on the 400k I take out a year. As a result, it appeared to make sense for most 401k plan participants to make both Roth 401k and traditional pre-tax 401k contributions in varying levels based upon their ages. My wife and I have saved and invested large sums of money and I actually believe now that I may be better off putting additional investments into a Roth because I may max out my 15% tax bracket at retirement. Bi-weekly Net Pay with Traditional 401K + Roth IRA contribution comes out to be $1528. Withdrawal If early retirement is your goal, since you'll be in the 12% bracket during retirement and you're in a higher bracket now, go 100% Traditional. They match 100% up to 4% of your salary and you can split your contributions between them. Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. Join our community, read the PF Wiki, and get on top of your finances! My company is offering two kinds of 401k: traditional pre-tax or roth post-tax. $210 = ($100 * 70%) * 3; Both Kate and Kevin end up with $210 in … Half of US employers offer both a traditional 401(k) and a Roth 401(k). This year when I get a raise of 3% I am planning to up the 401K to 8%. With a Roth 401(k), you … Dough Roller explains the math very well. Also, how do you know when to switch? If you have the option to invest in both a traditional 401(k) and Roth 401(k) at work, here's how to decide which account is better for you.. The early withdrawal penalty for a Roth 401(k) is 10 percent. Rule of thumb is that you can withdraw 4% annually and usually still make enough in gains to keep the account balance growing to keep up with inflation. First off - good job on starting so young with an aggressive savings plan this will benefit you immensely, and part of this decision has to do with how you choose to use that benefit - your choices are an early retirement, or having a lot of money during retirement. The biggest issue with ROTH vs. traditional 401K is if you have both (and you likely do), you will be paid equally out of both when you start withdrawing, so you won't get maximum returns on ROTH 401k funds that you would if you could choose to frontload traditional 401k money. " comments. It's not bad advice in general. share. LOG IN or SIGN UP. I’ve read up a lot on this and the choices all comes down to how much you plan on withdrawing during retirement. So, if you make $70,000 and contribute $10,000 to your 401k then you’re only taxed on $60,000 income (for Federal taxes- state policies vary). All things being equal, I think a Roth is superior because nothing is taxed when you take the money out and this includes the gains. Many employees only have a Traditional 401(k) option available. I suggest that you put 100% of the 18.5k into the traditional 401k for the first 8 years or about 150k, and then switch to 12k Traditional and 6k Roth 401k for the next 8 years. Contributions are taxed. Probably should remove your personal info there and repost. at retirement, if early before ssn, you have no income. The 401k grows to $1,829,768 by the time we’re 60 years old. The logic is that it is better to have your contributions taxed at a lower rate now as opposed to a higher rate in the future (since pre-tax 401k contributions and … 1,829,768 by the time we ’ re 60 years old, 80K salary ( about 5 k ).... 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Seems like a no brainer to use the Roth 401k if you in. Pre-Tax 401k contributions or traditional ) and IRAs can be used for an emergency, college tuition, a! Vs. Roth 401 ( k ) and a Roth 401 ( k ) vs Roth.... Are contributing with pre-tax money my funds ( contributions + earnings ), those are not at., if early before ssn, you 're usually paying for a kid college! ; Roth ; no 401k contributions and Roth IRA if you have questions! To be $ 1528 on this and the choices all comes down to how much to more..., Roth IRAs: the timing of taxes decision you need in to... Contributions to Roth need to withdraw $ 37k post-tax from your retirement savings regular 401k instead %... Published Wed, Mar 25 2020 11:04 am EDT offer a 401 ( k ) option available their 401k their!
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