Related Posts
KPMG fam when do we receive our 401k match?
When do you plan to retire?
Additional Posts
No company displaying!
Are part-time MBAs at top schools easy?
Chief
Finally about to fill this out!!! A dream come true :)
New to Fishbowl?
Download the Fishbowl app to
unlock all discussions on Fishbowl.
unlock all discussions on Fishbowl.
I hedge my bets since I have no idea where I'll be at retirement. I split my contribution 25% Roth, 75% traditional. I also max out a Roth IRA contribution, so it ends up close to 50/50.
Also no guarantees policies from a non taxable withdrawal don’t change - so a good hedge on that as well
What is your tax bracket now and what tax bracket do you think you will be when you withdraw the money when you retire?
The timing doesn’t really matter. If you invest the tax savings from the traditional, it is really the tax rates that would drive the decision. Of course no way to really know the tax rate in retirement
I have the same options and divert 25% to the Roth and 75% in pre-tax. The question about your expected tax bracket now vs your expected tax bracket after retirement is a good one and is usually framed by asking whether your expected retirement income will put you in a higher tax bracket than you’re in now (who knows!). You also have to consider whether the tax brackets will even be the same or similar to now when you retire. Again, who knows, but considering our national debt and SS funding shortfall and other factors, I have a hard time believing we’ll pay less income taxes in several decades than we do now. That’s why I hedge a bit by diverting at least some of my retirement earnings into a Roth account.
Enthusiast
If you have the money, then I would. Are you maxing out IRA?
Not to take away from this post, but can someone confirm, with the Roth 401k all the capital gains will be taxed at distribution, correct? It’s not like a Roth IRA where the capital gains are also tax free at distribution?
I believe what you are thinking of is an after-tax 401k - which is different than a Roth 401k. After tax 401k and non deductible IRAs are the same idea - no current tax benefit when you contribute, and when you withdraw your principal comes out tax free, but your growth is taxed. Usually people address this by immediately/shortly after this non deductible contribution is made, they convert to a Roth IRA - this ensures all future growth from that conversion date will be tax free when withdrawn. Referred to as a backdoor Roth IRA or a mega backdoor Roth.