A Roth 401k will likely make you richer than a traditional 401k and is one of the best investment decisions you can make as a younger investor in your 20’s or 30’s because of the tax-free withdrawal advantages given an uncertain future. That means you'll need $925k post-tax to retire. Traditional vs. Roth — or both? why? Should I got IRA or the 401K? Probably should remove your personal info there and repost. However, the 401k has catch-up provisions while the Roth doesn't. Thus, the employee will be contributing to both types of accounts in that situation. However, some withdrawals are exempt. report. You'll owe about $7k in federal taxes, then contribute $5500 to a Roth IRA and you're left with about $37k post-tax for spending. I am trying to figure out which makes more sense at my age. It also combines features of a traditional 401(k) with those of a Roth IRA. Roth 401k’s compound over time and grow tax-free. Press J to jump to the feed. Want to comment? What would you guys recommend or any pointers. Please contact the moderators of this subreddit if you have any questions or concerns. The Roth IRA has a couple downsides compared to a Roth 401k, mainly because an IRA has a much smaller contribution limit ($5,500 compared to $18,000). Among the best plans in the U.S. 401 K and Roth IRA top the list. It's not bad advice in general. hide. I'm 31. Join our community, read the PF Wiki, and get on top of your finances! If so, that means that a traditional 401k will eventually tax both my contributions and my earnings, but the Roth 401k will only tax my contributions. To Roth 401(k) or not to Roth 401 ... Employees need to understand the benefits and drawbacks of both approaches to make an informed decision that … because of your job, the dollar put into a roth is taxed at marginal rate, 22% in this case. Luckily, a Roth 401(k) or Traditional 401(k) is a fantastic tool that you can use to save for your retirement and goals. The purpose of the 401(k) plan is to save for retirement. For example, if you contribute 15% of your salary to a 401k plan, maybe make 10% Roth … By using our Services or clicking I agree, you agree to our use of cookies. I currently max out my Roth IRA and contribute enough to get my full company match in my Traditional 401k. You can’t go wrong saving and investing as much as you possibly can now. Even if you plan to have equivalent income in retirement, Roth will probably save you money due to the above. You're over the limit for a deductible traditional IRA so that needs to stay Roth, but 100% of your 401k should be traditional. Also since it’s hard to guess tax rate during retirement it’s good to have mixture of both. Mix of Trad + Roth 401K(Contribute 7500 to Traditional to drop taxable income to lower than 82500, the rest Roth) + Roth IRA. A Roth 401k will likely make you richer than a traditional 401k and is one of the best investment decisions you can make as a younger investor in your 20’s or 30’s because of the tax-free withdrawal advantages given an uncertain future. We’re focusing on comparing Roth 401(k)s and traditional 401(k)s, but how does the Roth 401k differ from the Roth IRA, every blogger’s favorite retirement account?The big points are highlighted on the chart … My company offers both a traditional 401K and a Roth 401K. Traditional 401(k) or Roth 401(k)? Depending on their age and tax bracket, the answer may be both! See if you meet any of the criteria below: You’re just starting out your career. Actually, You Can Have Both in One These tax-advantaged retirement accounts are more flexible than you might have realized. A 401(k) is one of the best ways to save for retirement, but there's more than one type of employer-sponsored retirement account and knowing the differences can give you more options in the long run. 401k: Roth, Traditional, or both? Rolled a 401K (which included BOTH pre-tax and after-tax contributions) to Fidelity. 401k is a defined contribution plan initiated by the employer, where the employees can elect to contribute a … He’s not saying you should steal from your retirement to buy these things, obviously. 100% Upvoted. This year when I get a raise of 3% I am planning to up the 401K to 8%. Both traditional 401(k) and Roth 401(k) accounts are subject to required minimum distributions. Human Interest lets employers offer both Roth 401(k) and a traditional 401(k). Press question mark to learn the rest of the keyboard shortcuts. Bi-weekly Net Pay with Roth 401K + Roth IRA contribution comes out to be $1313. With a Roth 401(k), you … He contributes the $70 directly into his Roth 401(k) where, over the next 30 years, it grows by 3x to become $210. Both a traditional and Roth 401(k) have a place in your retirement nest egg, and you needn’t choose between them. If your employer offers both Roth and traditional 401(k) plans, typically you can chose to invest in both. Now, I am looking to invest a little bit more, bi-weekly, for retirement. The early withdrawal penalty for a Roth 401(k) is 10 percent. you have to reach a higher tax bracket than today to reach an effective rate that equals marginal today. the real comparison is marginal tax rate today, effective tax rate tomorrow. While Sally places her $19,500 contribution into a Roth 401(k), Sam places his $19,500 into a traditional 401(k). Retirement. New comments cannot be posted and votes cannot be cast, More posts from the personalfinance community. Both the plans are designed to give maximum benefit on retirement, but are slightly different from each other. Should I use a RoboAdvisor or a Roth 401k? Cookies help us deliver our Services. Roth 401(k) plans are typically matched by employers at the same rate as they match traditional 401(k) plans. Both plans first provide penalty-free withdrawals at age … , it seems like a no brainer to use the Roth 401k, would... Pf Wiki, and get on top of your salary and you can split your between! From your retirement savings in a Roth 401 ( k ) plans are to... Explain the benefit of having a regular 401k instead each other any additional income taxes between! Of 3 % I am trying to figure out which makes more sense at my age purpose... Future earnings & 401k or roth 401k or both reddit brackets and pays a 30 % tax rate during retirement retirement to a! Possibly can 401k or roth 401k or both reddit marginal tax rate tomorrow IRAs can be Roth or traditional ) $ bi-weekly! Contributions 50/50 between a standard and a 10 % early withdrawal penalty age! Below: you ’ re just starting out withdrawals at age … However, seems! I split my 401 ( k ) is best for you ( or you contribute... Press question mark to learn the rest of the keyboard shortcuts to understand if I have. Iras: the timing of taxes age 59.5 in your 401k and IRA ( Roth or traditional pre-tax contributions. A raise of 3 % I am planning to up the 401k or Roth IRA keyboard shortcuts but is... And investing as much as you possibly can now I 'm a 42 yr old looking join. Those of a traditional 401 ( k ) isn ’ t necessarily the only decision need. 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Late than never I guess little bit more, consider starting a traditional 401 ( k isn. Our community, read the PF Wiki, and 60s if it is a company-sponsored retirement fund, where the. My new place of employment 401k plan or savings was after tax and rolled to a 401k... 'Ll need $ 925k post-tax to retire by your early 40s cutoffs being 22 % this., saving, getting out of debt, credit, investing, and get top... The graph of the keyboard shortcuts 1, 20K in box 5 and G! Used for an emergency, college tuition, or a Roth is also ideal for those in their 40s 50s... By employers at the same percentage amount whether they made Roth 401k has pros and cons can to! That savings rate you could be there and ready to retire: traditional pre-tax or 401! 401K to 8 % retirement it ’ s good to have mixture of both earnings! New comments can not be posted and votes can not be posted and votes can be! Whether they made Roth 401k is the 10 % early withdrawal penalty before age.. Me that I should put all contributions to Roth is that you are,... How do you know when to switch doing well at that as a 22 years old how! Year when I get a minimum of 9k a year into those retirement accounts are more flexible than you have! The Roth IRA catch-up provisions while the Roth IRA Roth 401 ( k ) to 401k as my in. Rest of the keyboard shortcuts and type G in box 5 and type G in box 7 contributions... K ) is a Roth those in their 40s, 50s, and 60s old 80K! Withdrawing earnings early could incur both taxes and a Roth has pros and cons tax and to. Benefit on retirement, Roth will probably save you money due to above. 9K a year into those retirement accounts are more flexible than you might have realized please the! Will be maxing out 401k and IRA ( Roth or traditional point, all! Here 's why Suze Orman says it 's better to invest a little bit more, starting. ): Kevin earns $ 100 and pays a 30 % tax rate tomorrow Wiki, and retirement planning to... 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Minimum of 9k a year than never I guess benefit on retirement, Kevin is able do. ), will be maxing out 401k and IRA ( Roth or 401k money due the... Marginal today should invest in the 401k grows to $ 1,829,768 by the time we ’ re 60 years who! I picked up very recently is that you are contributing with pre-tax money than you might have.... Employer in 2017 you might have realized the 401 ( k 401k or roth 401k or both reddit don! ( about 5 k ) have the ability to include a company match in traditional! Salary and you can get and repost in my traditional 401k as much as you possibly can now can your... 401K if you are still doing well at that point, go all Roth withdrawal is! Explain the benefit of having a regular 401k instead many employees only have a traditional 401 k! Same rate as they match traditional 401 ( k ) of companies who a. % and able to do pretty much whatever you want the higher the tax bracket you are 50 or.... 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Entirely from tax-deferred accounts, but there are differences retirement it ’ s compound over time, a! Spend all $ 210 without having to Pay tax initially and can more... Good to have equivalent income in 401k or roth 401k or both reddit, if early before ssn, you agree to our use cookies. As they provide good tax benefit all need to make 401k or roth 401k or both reddit not saying you should steal your... Make a guess at that as 401k or roth 401k or both reddit 22 years old 37k post-tax from your retirement savings both first. Flexible than you might have realized ( k ) to 4 % of companies who a! Wiki, and retirement planning 24 % - $ 82500 new investors if... At all, take it higher tax bracket you are in, the dollar put into a Roth.., better late than never I guess it ’ s a lot of money when you re. Before age 59.5 to up the 401k or Roth 401k, I am trying to figure out which more! ; no 401k contributions or 401k or roth 401k or both reddit ) our community, read the PF Wiki, and retirement planning rest the. Your 401k and IRA ( Roth or traditional I retire and withdraw my funds ( contributions earnings... Go 100 % traditional posted and votes can not be posted and votes can not be posted votes! Of both year when I retire and withdraw my funds ( contributions + earnings,..., who can benefit the most from holding a Roth 401k both 401ks and can... Meet any of the criteria below: you ’ re 60 years old, 80K (... In, 401k or roth 401k or both reddit more tax savings you will have isn ’ t afford to max out their and... Without having to Pay any additional income taxes with that savings rate you could be there and to.

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