How do I know whether I should do a Roth IRA, pre or post tax 401K and all of this. New to this, trying to understand in laments terms

like
Posting as :
works at
You are currently posting as works at

If you’re young, Roth everything all day everyday. Roth grows tax free, meaning the capital gains and dividends are not taxed in the future - but they are taxed now. The assumption is that tax rates will go up in the future, and that the stock market will be higher in the future.

like

I do a Roth IRA and split my 401k between traditional up to the employer match and rest is Roth

In theory you would compare your tax bracket now vs in retirement when you withdraw. If bracket is lower now, Roth. If lower in retirement, traditional. Since you don’t know the future, a split may be a good compromise. If you do traditional, you should invest the tax savings. If you don’t Roth would be better.

Contributions are taxed in Roth but not 401k. Gains/distinctions are taxed on 401k but not on Roth. Depending on investment growth you could likely end up better off in Roth since you won’t have to pay tax on gains, dividends etc. which are taxed when you make withdrawals from 401k even if money going in is pre tax. Mix of both is best strategy.

You are forgetting that you get a tax deduction for traditional. If you invest that you will be the same. If you are in the 24 bracket for example and put 10k in Roth. If you put that in traditional you would be able to invest 24 percent more and have the same take home. Your balance would be 24 percent higher at retirement time. That will cover the taxes.

smart

Honestly the most important thing is to contribute as much as you can afford to any of them. Your future self will thank you. Over time you’ll learn about optimizing which one at what point in your career. If you’re early in your career, I would definitely first contribute up to the 401k match, contribute to an HSA if available, and then contribute to your Roth IRA. If you have student loans, refinance to the lowest rate possible and don’t skip out on the other contributions to rush to pay them off.

Related Posts

Can i use my marriott and delta points to book travel for my parents? If yes, would they enjoy the same platinum benefits as me?

like

USI folks - Do you know if the Sum assured of the health insurance offered by Deloitte is for per year or total. Context, I am currently at Deloitte US and thinking of requesting a USI transfer because of a serious health issue for one of my parents. Would be really thankful if someone can clarify 1)Will parents existing conditions/treatment (Chemotherapy ) be covered from my day of joining and 2) Will sum assured will reset every year (if yes, then when, January or our FY). Thank you

I sometimes worry I won’t be happy until I’m the day I retire ok kinda dramatic but God how do you get through bad days or leave the stress at work

like

Is the Publicis maternity leave policy on campaignlive accurate? 6 weeks full pay then disability? Can't find it on the benefit website and afraid to ask.

like

Does anyone's significant other unable to WFH complain about us having it easy? I tell her we are getting even more work and add to the fact that I'm also taking care of a 1 year old while shes at work. I feel it's kind of unfair because when shes home I help out but when shes at work its me doing everything on top of work. Just ranting, I love my wife and knows she works hard as a healthcare prosessional. It just gets a lil frustrating sometimes.

like

Is there a way to access 401k funds in early retirement without a penalty? Been contemplating getting out of this rat race.

like

I’ve got close to 30 reqs and the one that keeps falling to the end of the list is... you know it — the FT recruiter spot! 😭 Seeking a healthcare advertising savvy recruiter to join me on my quest of the best talent, while preserving a wonderful culture - in a true indie owned/operated agency! @ The Bloc

like

Does PwC not offer a PPO or HMO for health insurance?

like

So I got a house for $260K using my 401K as a down payment. I put down $50K but that’s 70% of my retirement. I don’t really have a savings but I’m tired of paying rent. Do you think that was a good financial decision? Mind you the house is brand new, in a new area, and the houses in the subdivision have already gone up.

like

I make $4000/M after taxes and max 401K and spend about $2400 for all fixed costs (rent, utilities, etc). With roughly $1600 left, and with a strong goal of saving as much as I can, what are some recommendations on how I should allocate my money better. I know this is vague but need some better financial planning.

like

What does everyone do when they max out their 401k AND IRA? Taxable investment account? Something else?

like

Realized I’ve been contributing all post tax dollars to my 401k for the past 1.5 years. Am I able to convert this to a roth somehow? What kind of tax liability might I have? Should I switch to pre tax contributions?

like

Is it me or does EY's health insurance sucks big time? Is this the case with other firms too? Did a simple abdominal ultrasound- 500$ out of pocket!!

like

How’s the benefits at S&? Is it the same as PWC?

like

So i received a 401k check but they didn’t take taxes out .. how should i happen it? They sent me a 1099-R how much are taxes ?

like

Mum got £100k from a pension fund after my dad died and doesn’t know what to do with it - and neither do I. She is risk-averse so I was thinking of an index tracker, but that might be dumb if the stock market is going to tank some more soon. Any suggestions?

like

What are the benefits of moving out of parents house ?

funnylikehelpful

For those in their 20s. How old are you and how much do you have in your savings? (Excluding 401k)

like

Anyone planning to attend Wharton Entrepreneurship Acceleration program starting June 30th?Do let me know and we can both share the referral benefits

like

Any recommendations to speed things up? I often feel like others in FIRE have their finances growing faster. I’m living at home with parents during covid and able to save/invest ~90% of my post-tax income. I put ~40% into retirement accounts (401k, backdoor roth, mega backdoor roth), ~10% into brokerage, and ~40% towards savings for a down payment (planning to buy a home EOY). Any advice?

like

Additional Posts

After going through all posts in this group, all I can say is “Make H1B great again”....!!

likefunny

At dinner yday Partner expressed concern coz I am on bench in Jan but taking vacation in Feb. Just heard from my RL that I need that partner’s approval since vacation is 3 week long. Hw to approach?

Any insight into Sichenzia Ross Ference in NYC?

like

Thinking of applying to M7 schools and really unsure about my chances. I am latin american, started in a LatAm office at MBB and x-fered to the US last year. I have 3 YOE and a military background. I have an engineering degree with pretty bad GPA (3.1) and a solid GMAT (730). Is M7 out of the question due to GPA? or is the MBB brand and financial sponsorship strong enough to overcome? What are your thoughts?

like

In a few weeks I’m transitioning from a client-facing consulting role to an internal role that’s not client facing. Looking forward to the WLB but a bit anxious about the pivot out of client work (will it be too slow paced, will I get bored, etc). Anyone have tips on being successful in this transition out of client work?

like

Who is ultimately responsible for a mistake in a work paper? The associate who prepared it? Or the senior who reviews and sends it over to the client?

like

I’m going to be 5 nights away from Marriott Platinum elite at years end. Can I just find a super cheap Marriott property near my house to check in (but not stay there) and earn the remaining nights?

like

When I get a brief and someone says "I know you're swamped but thought this could be a really fun project for you!" 😒😒😒

likefunnysmart

Feeling a little gutted, I report to a new CC and we are the opposites in all aspect (race, gender, privilege, culture, etc) and I set a meeting with him today (continued in comments)

like

What's the typical MBB EM/PL comp in South East Asia? Bangkok or Jakarta?

like

strategy& fish- what are the partner interviews like? is it more behavioral or case focused? any tips to prep?

like

Any one at Detroit DTW? ..., have 2hrs to burn. Need a recommendation in A terminal for great scotch and people watching....

like

I am an Engineering lead for software development with exposure to product and project management functions, and started an MBA at m7. What are my best options to pursue a career in consulting?

How do I know if leaving consulting would be right for me? I’ve been thinking about it for the past year. I feel very unfulfilled and unappreciated. I tried to brace through till next promo - which I ended up being passed over for last Dec. I’ve started looking into other lines of work that may be more rewarding for me, but I can’t seem to make the leap. Mainly, I feel reticent on letting go of the prestige that comes with consulting, and that maybe I should hold out for the promotion.

likehelpful

What’s it like working at Mindshare? I’m interviewing for the UL Analytics team and was wondering what the culture is like

likehelpful

Intended to work from home today, only to remember I left my computer charger in the office #rookmistake

like

I have held chase sapphire reserve for about 4 years. Anyway i can take advantage of the 100k bonus being offered for chase sapphire preferred right now? I am more than willing to downgrade or cancel my csr card. TIY!

like

Any EY folk can give me advice on your interview process? I have 2 coming up in 2 weeks! I really hope I get an offer!

Recruiter I was talking to left the agency and I haven't been able to get ahold of anyone else at HR. Final interviews went well, received a verbal offer before they left. How long until the process gets back on track or is it a lost cause?

like

Have a trip planned to go to Rome next week. Should I cancel even though coronavirus is mainly in the north? Have been really looking forward to this trip, but not sure if it’s irresponsible to go.

like

New to Fishbowl?

Download the Fishbowl app to
unlock all discussions on Fishbowl.
Download Fishbowl to see what others are saying
That was just a preview…
Sign Up to see all discussions
  • Discover what it’s like to work at companies from real professionals
  • Get candid advice from people in your field in a safe space
  • Chat and network with other professionals in your field
Sign up in seconds to unlock all discussions on Fishbowl.

Already a user?
Login here

Share

Embed this post

Copy and paste embed code on your site

Preview

Download the Fishbowl app

Get realtime notifications and see
what's happening in your industry
from the palm of your hand.