Start Roth 401(k) Contributions or wait for Roth IRA Conversion

[StacheyNotTrashy]

Hi all-
New member here. Recently I've been researching and looking long and hard at my wife's and my finances with a goal of retiring in our mid- to late-40s. Amazingly it looks like a very realistic goal!

Along with my research I've started pouring into the tax implications of withdrawing from all our different retirement (and non-retirement) accounts. We are both maxing out everything we can: 401(k)s, Roth IRAs and HSAs, along with continual contributions to a Betterment account. I also will receive a small pension from my work starting at age 65.

I'm trying to figure out if it would be beneficial for me to start contributing to my company's Roth 401(k) instead of the traditional 401(k) that I've been maxing out, or if it's better to continue with the trad 401(k) and use our first few years of retirement (in which we will hopefully be in a lower tax bracket due to first pulling from our non-retirement investment accounts) to convert as much trad 401(k) funds as possible into a Roth IRA. We are looking at 6-7 years more of work income before we FIRE.

I appreciate any thoughts or resources that you all can provide! And I look forward to being part of this awesome community!

[Junco]

Your "best" course of action depends on your unique financial situation and current allocations in Pre-tax vs Post-tax investments.

When you RE, you probably want access to 5-years of living expenses in Post-tax investments or cash. That way you can set up a Roth IRA ladder without having to pay any penalties. Any excess may be best to shove in pre-tax accounts for now because you will probably be paying less in taxes after RE (assuming you live frugally and pull out less than you are earning now).

Personally, I hope to RE in around 4-5 years. When I retire, I'd like to have 1-2 years in Cash Savings and 3+ years in a Taxable Brokerage Account and/or Roth. The rest is in my 401k and Traditional IRA. My yearly income will go from 80k -> 20-30k after retirement so I see it as best to max out the pre-tax contribution accounts now because I think I'll pay less in taxes when I withdraw. Since you and I are still 4+ years out from RE, I think it's smart to just take the tax break now by maxing out your pre-tax 401k/HSA/IRA rather than invest excess into ROTH or Taxable accounts.

https://madfientist.com/ has some good articles on tax optimization for FIRE folk.

[MDM]

I'm trying to figure out if it would be beneficial for me to start contributing to my company's Roth 401(k) instead of the traditional 401(k) that I've been maxing out, or if it's better to continue with the trad 401(k) and use our first few years of retirement (in which we will hopefully be in a lower tax bracket due to first pulling from our non-retirement investment accounts) to convert as much trad 401(k) funds as possible into a Roth IRA.

Traditional versus Roth - Bogleheads has all that (more than?) you should know about this topic - other than a guaranteed way to predict the future.