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If you are starting as an Audit Associate some time from now with Deloitte or any of the big 4, do they expect you to have passed/completed all 4 parts by the time you start? Received the Becker Reimbursement email from the recruiter not too long ago but have yet to start. I’ve seen plenty of people get to Senior at a big 4 firm without the CPA so I am a bit confused in that aspect. Any helpful feedback will be very much appreciated.
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Do you mean a Roth 401K and a traditional 401K?
Roth IRA is a separate individual retirement account. You can contribute up to $6K annually after tax and it grows tax free. There are income limits. Can do back door if you are above limits.
Roth 401K allows you to contribute after tax dollars to your 401K. Also grows tax free. Regular 401K is pre tax. You can contribute ~$20K to these. More if you do the mega back door.
Why are you recommending a Roth IRA, which is capped at $6k over a Roth 401k which is capped at $20,500? You are missing out on $14k of tax free growth per year. You could do both too. This is not to be confused with traditional 401k.
Pro
401k: ideally you get an employee match which is literally free money. Pre tax contributions so you have lower gross income when it comes to filing taxes. Growth gets taxed once you take our deductions during retirement.
Roth IRA: post tax contributions, so you usually contribute to this once the money hits your checking account, doesn’t impact gross income when you file taxes, but the growth on the investments in your Roth are tax free when you take out deductions in retirement. Has a lower annual limit than 401k.
Ideally (and it’s what I do) I Max out 401k and then also max out Roth IRA. Gets a mix of both the tax free money now, and tax free growth in the future.
Chief
Well a Roth 401k vs ordinary 401k would be you pay the tax now on the Roth and the benefit there is based on you’re assuming that your tax rate will likely be higher than what it is now when you’re old. The trade off is it’s more expensive to pay the tax now so you likely put less in the account and if it grows exponentially like most investments you’re looking at a smaller nest egg.
IRAs and 401ks and different things though. 401k is usually employer administrated. An IRA is an individual retirement account, but there Roth vs ordinary applies to
Both. There’s also limits on how much you can put in to 401ks and IRAs.
Do Roth 401 brother. If you expect to be making more money in the future (higher income tax brackets) that is going to benefit you in the long run. No tax when you take it out of the pot.
Take the tax hit now because they aren't getting any lower!