Author Topic: 401k and Trad vs Roth  (Read 475 times)


  • 5 O'Clock Shadow
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  • Posts: 50
401k and Trad vs Roth
« on: September 21, 2017, 12:09:14 PM »
Hi all

I'm 37, make 101k with 3% employer match to 401k. Wife 35, makes 40K, no match. We have 2 kids ages 3 and 1. This is less than we've made in previous years due to a lifestyle change (less work, more free time with kids, yeah!). Probably will make more in the future due to my job growth.

We both max out our 401ks.
This year, we are on course to max our Traditional IRAs. My understanding is that at our current income level we can deduct both 401k and IRA. Is that correct? Was this the right choice? My thinking: lower our tax bracket while we have the chance and qualify for health insurance subsidies.

If not the right choice, why?
If so, at what income level does it make more sense to max the Roths?



  • Magnum Stache
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  • Posts: 4407
  • Age: 33
  • Location: Seattle, WA
Re: 401k and Trad vs Roth
« Reply #1 on: September 21, 2017, 01:48:45 PM »
Your total MAGI needs to be below $99k to make fully-deductible traditional IRA contributions. If your gross income is $141k and you both max out traditional 401(k) accounts, that puts you at $105k. If you have $6k worth of other deductions that count toward your IRA MAGI (such as HSA or payroll-deducted health insurance premiums), you could deduct your full $5,500 IRA contributions. Otherwise you would only be able to deduct a partial contribution.

In general, I think that most Mustachians with high savings rates will be better off making traditional contributions where they have a choice, unless you're in such a low-income year that you expect to pull more than this year's income from traditional retirement accounts in a typical year during your retirement.


  • Handlebar Stache
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Re: 401k and Trad vs Roth
« Reply #2 on: September 21, 2017, 03:04:27 PM »
If you can't deduct the IRA contributions, make it Roth instead. This assumes you are maxing your t401k contributions.