Author Topic: New to investments. Is employee Roth different from regular Roth?  (Read 291 times)

FamilyGuy

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My base salary is 129k and bonus before tax is 20k. I was contributing only 7% to 401k in order to match my employer contributions. I'm planning to max 401k and IRA and Roth.

In Fidelity website, I found I have Employee Deferral and Employee Roth and below note.

"Your employer matches up to 6% of your eligible compensation that you elect as Pre-tax or Roth contributions.   When you contribute to your plan, your employer matches 100% of the first 4% of your pay, and 50% of the next 2%.".

Should I be contributing to both of this? Also I opened up a Roth with Vanguard as well (not contributed much).

Thank you for your help.

EvenSteven

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Re: New to investments. Is employee Roth different from regular Roth?
« Reply #1 on: September 14, 2019, 05:59:48 AM »
"Roth" and "Traditional" are two kinds of tax treatment for accounts. Roth you pay tax now, but it is tax free coming out, and traditional is tax free now, but you pay tax coming out. Your 401K has a combined limit of 19K of employee contributions, so for example if you contribute 10K to traditional, you can only contribute another 9k to either traditional or Roth.

IRA accounts, be they traditional or Roth, are on a different contribution limit from your 401k. In your IRAs you have a limit of 6k of contributions. Same as your 401k, this is the combined limit of both traditional IRA or Roth IRA.


FamilyGuy

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Re: New to investments. Is employee Roth different from regular Roth?
« Reply #2 on: September 14, 2019, 06:11:53 AM »
For 401k, if an employer offers both traditional and Roth, is it better to contribute to traditional? I assume that has better advantages for long term as itís tax deductible...

EvenSteven

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Re: New to investments. Is employee Roth different from regular Roth?
« Reply #3 on: September 14, 2019, 06:17:12 AM »
Whether to choose Traditional or Roth will depend on the particulars of your individual financial circumstance.

At your income I would guess that traditional would be the best choice for your 401K. For more information see:

https://www.bogleheads.org/wiki/Traditional_versus_Roth


Your income is too high for your IRA to be tax deductible, so Roth would be the way to go in your IRA. Look out for income limits on the Roth IRA though, I think for a single filer you will be close to the phase out, in which case you might want to look into the backdoor Roth.

https://www.bogleheads.org/wiki/Backdoor_Roth


FamilyGuy

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Re: New to investments. Is employee Roth different from regular Roth?
« Reply #4 on: September 14, 2019, 10:14:21 AM »
Whether to choose Traditional or Roth will depend on the particulars of your individual financial circumstance.

At your income I would guess that traditional would be the best choice for your 401K. For more information see:

https://www.bogleheads.org/wiki/Traditional_versus_Roth


Your income is too high for your IRA to be tax deductible, so Roth would be the way to go in your IRA. Look out for income limits on the Roth IRA though, I think for a single filer you will be close to the phase out, in which case you might want to look into the backdoor Roth.

https://www.bogleheads.org/wiki/Backdoor_Roth
Thank you. I married filing jointly (but single income). I believe Roth IRA for me after maxing out 401K.