{ "media_type": "text", "post_content": "Hi guys, I know this has probably been asked multiple times but need a fresh wind of advice. Shall I switch from pre tax to post tax/Roth contribution for reminder of the year? Not sure what’s the benefits are of each. If I anticipate my income to go up, shall I max Roth now?", "post_id": "6104a4d210cfcf001c348b91", "reply_count": 16, "vote_count": 1, "bowl_id": "59064a3cb12379001006592c", "bowl_name": "Personal Investment Chatter" }

Hi guys, I know this has probably been asked multiple times but need a fresh wind of advice. Shall I switch from pre tax to post tax/Roth contribution for reminder of the year? Not sure what’s the benefits are of each. If I anticipate my income to go up, shall I max Roth now?

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In theory the determination is based on your tax bracket now compared to you tax bracket when you withdraw the funds in retirement. It will be about a push if you invest the taxes you save from pretax and the rate is the same at both times. If you are not going to invest that amount, Roth would be better.

Thanks EY, I don’t know what my income will be at retirement so maybe I do a mix of both? I’m also trying to consider inflation...

Thank you so much P1, really appreciate your advice! :)

I jumped from $100k to $150k salary and that's when I started contributing all of the $19.5k to pretax. I pay s lot in taxes now, so it was helpful to reduce my tax liability. Additionally, i think tax diversification is important, so I also have a Roth IRA (backdoor) and in-plan converted Roth funds in my 401k (mega backdoor). I'm actually close to 50/50 split because of the 401k after tax mega back door.

The ability to make tax-advantages contributions to a Roth IRA phases out at a certain level of income. There is a trick call backdoor Roth IRA to avoid the limitation. You start by contributing to a traditional IRA, then you convert it to a Roth. No penalty, you just have to pay the taxes. There is also a mega-backdoor Roth IRA using the after-tax 401(k) contributions. You can search up these terms for more details.

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