{ "media_type": "text", "post_content": "Pre-tax 401k or post-tax 401k contributions? On the one hand Pre allows you to have a bigger base and pay fewer taxes, but Post seems to make more sense with higher tax brackets looming. Thoughts?", "post_id": "59301954f8ec4d0010b4d1cf", "reply_count": 12, "vote_count": 2, "bowl_id": "564a5cdb94887803001dd07c", "bowl_name": "Accounting" }

Pre-tax 401k or post-tax 401k contributions? On the one hand Pre allows you to have a bigger base and pay fewer taxes, but Post seems to make more sense with higher tax brackets looming. Thoughts?

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Do half and half- tax diversify. Or, do all pre tax for the 401k and get yourself a Roth IRA as well

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I would say do Roth while you can too because the phase out starts pretty low(118k I think). I'm 5 years into public and about to hit the phase out so I'll lose the ability to contribute to that soon. If you figure you'll have a 40 year career I'll be able to contribute to my 401k for all of that but lose the ability to contribute to the Roth at some point. So I've maxed out my Roth every year so far.

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Do you mean higher tax brackets in the sense that you envision yourself being in a higher tax bracket come retirement years when you take distributions or in the context of tax reform? Because if the latter i think if we know anything from potential tax reform proposals it's that the tax rates will be going down, not up.

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If you don't have a traditional IRA - you can still contribute to ROTH despite income limit. Just roll it over from traditional to ROTH every year.

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Roth 401k - in 30 years the balance of the account should be 30% what you contributed and 70% growth. I'd rather pay taxes on 30% of the balance than pay taxes on 100% of the balance. I run a Roth IRA as well and you can always backdoor Roth IRA if you exceed the income limit in a given year.

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Put a model together and figure it out... if you think you will have a lower tax rate when you are using the 401k than now, go pre tax. If you think your current rate is lower than it will be in the future when using the 401k, then go post tax.

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PwC 1 - I mean I expect / hope for my retirement income to be higher than it is now.

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Roth would be good option if you do anticipate higher taxed earnings when you take the distributions

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Should definitely have a ROTH to balance and so some of your earnings grow tax free.

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There is no income limit for Roth 401(k) contributions, just Roth IRA. And you can contribute up to $18k in Roth 401(k) vs. just $5,500 in Roth IRA. I expect CPAs to argue tax side of the equation, but you must consider the impact of the investment compounding side of it.

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This isn't even a question, post tax. I'd much rather pay tax now on my associate salary than on those earnings 30 years down the line. Plus hopefully I'll be making more money 30 years from now, although maybe I'll be a staff forever 😳

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Thanks for the tips D1 and MA1. I might just go pre tax and Roth to cover both bases.

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