Author Topic: My First 401k: Roth/Traditional Split For 28% Bracket?  (Read 1671 times)

Ramza Beoulve

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My First 401k: Roth/Traditional Split For 28% Bracket?
« on: June 13, 2015, 11:10:15 AM »
My First Employer-Funded 401k: Roth/Traditional Split For 28% Bracket?

Age: 28
Income: ~$110,000
Filing Status: Single
Federal Tax Bracket: 28%
No State Income Tax
Emergency funds: Yes
Debt: $30,000 (Done by 3/2016)

I graduated in 2012, but I was essentially unemployed or underemployed for about 16 months during my first 2 years out of school, so only managed to put away in a Roth IRA during the first few years post-graduation. Right now, I am fortunate enough to be with a Fortune 50 company since October. This is my first 401k fund. My company has a Roth and Traditional 401k option. I intend to max my 401k, IRA and HSA every year from now on.

My Projected End of Year Total
$18,000 in 401k
$16,500 in Roth IRA
$4400 in Company Match (4% of Gross Salary) + Discretionary Match
$3350 in HSA Account

My current 401k split is 6% in a Traditional and 11% in a Roth 401k. My employer match goes into a Traditional Account. I'm essentially hedging my bets in case federal income rates rise. My eventual plan may be to roll over the Traditional to a Roth in years when my effective tax rate is lower.

Basic Question: Is the decision to split it up in these percentages a good idea?

seattlecyclone

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Re: My First 401k: Roth/Traditional Split For 28% Bracket?
« Reply #1 on: June 13, 2015, 11:14:26 AM »
In the 28% bracket you're generally going to be better off taking all the tax deductions you can, which means putting all of your 401(k) money into the traditional. Even after the 401(k) and HSA deductions your income is probably going to be too high for traditional IRA contributions, which means you'll still get some after-tax saving through your Roth IRA.

forummm

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Re: My First 401k: Roth/Traditional Split For 28% Bracket?
« Reply #2 on: June 13, 2015, 11:16:27 AM »
What will your income be when you retire? If it's going to be in a lower bracket, then you'd be better off putting your 401k into all traditional. If you're going to be spending at the 28% bracket level, it will take a lot of time and/or income to RE, unless tax rates go up dramatically for lower income.