Author Topic: Roth vs 401k Roth  (Read 2004 times)

Baylor3217

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Roth vs 401k Roth
« on: March 01, 2013, 09:45:46 PM »
They started the 401k roth last year i believe and I haven't really researched it.  I was unable to max out the regular roth until they changed the rules a few years back, but now that that's not an issue, I max that out.

My company matches $ for $ up to 9.3% (as an aside, that's the greatest company 401k I've ever heard of.  If yours is better or you've heard of one better, please let me know because I'd like to be able to accurately put it in context).

The net of the 401k is that I put 10% of my pre-tax in their and with the company match, i add about $34,000 per year to my 401, all things being equal.

I'm not even sure I can do the 401k roth in addition to what I'm already doing, but do you experts have any thoughts on the options and pros / cons?

icefr

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Re: Roth vs 401k Roth
« Reply #1 on: March 01, 2013, 10:23:53 PM »
You can contribute $17,500/year to any combination of Roth/Traditional 401(k) accounts. You can contribute some % to both. Regardless of where you contribute, your employer matching 401(k) account is essentially a Traditional 401(k).

I don't know what tax bracket you're in, but personally I prefer to save on the taxes now since that's 28% I don't have to pay and even if I end up paying 28% when I withdraw (which may be unlikely), I'd rather pay it then than in the accumulating phase.

9.3% is an amazing employer match. That would be over $10k/year at my income. My employer matches piddly squat compared to that.

Baylor3217

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Re: Roth vs 401k Roth
« Reply #2 on: March 01, 2013, 10:35:54 PM »
Thanks for the info.  Yes I am very very fortunate my employer matches as well as they do.  We don't get bonus checks like some of my friends, but our match is unreal.

Zaga

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Re: Roth vs 401k Roth
« Reply #3 on: March 02, 2013, 10:26:22 AM »
icefr pretty well covered it.  Your match is indeed awesome!  I get 5.75% (will increase as I get older) for putting in 5% and my husband gets 6% for putting in 6%.  Plus I can potentially get a 10% bonus depending on the company's performance, well actually my bonus could max out at something like 24%, but 10% is the target and I think we'll be in that range this year.  It would also be possible for the bonus to be 0%.

So if I was in your shoes and able to contribute to a Roth IRA, then I'd set my 401-K to traditional at whatever % will get you to $17,500, then if possible max out the Roth IRA.  I think of this as tax diversification, you get some money in tax deferred and some in tax free.

We put in 15% to our 401-K's pre-tax right now, that doesn't get us to maxing out, but debt paydown is our current target.  Also, if my DH gets this job he interviewed for last week he may not have access to a 401-K for 6 months or more, in that case we'd go with some Roth IRA funding to make sure we're saving enough.  I think our 15% saving level is "enough" for us to retire comfortably at a typical age, as the debts decrease we'll be ramping that up.