Author Topic: Should I be using Roth 401k in 15% bracket?  (Read 1872 times)

unflinching

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Should I be using Roth 401k in 15% bracket?
« on: August 10, 2013, 10:10:48 AM »
After deductions my taxable income will be in the 15% bracket for the next few years.
I max out my 401k pretax, but I think I should be switching to the Roth 401k for the following reasons:

1. My retirement income is almost guaranteed to be taxed >10%
2. Since I max out the 401k, contributing post tax actually lets you squeeze a little more into it.

Does this sound correct?
« Last Edit: August 10, 2013, 11:17:51 AM by unflinching »

beltim

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Re: Should I be using Roth 401k in 15% bracket?
« Reply #1 on: August 10, 2013, 10:58:21 AM »
If both of your assumptions are correct, yes, your conclusion is correct.

Why do you think your retirement income will be taxed at a rate higher than 15%?

beltim

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Re: Should I be using Roth 401k in 15% bracket?
« Reply #2 on: August 10, 2013, 11:20:29 AM »
Will the pension start immediately upon your retirement?

beltim

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Re: Should I be using Roth 401k in 15% bracket?
« Reply #3 on: August 10, 2013, 12:14:15 PM »
Okay, good to know.  But now your original post says your retirement income will be taxed greater than 10%.  I think the answer to your question lies in whether you'll be in the 10% or 15% bracket.  Why would you want to pay 15% taxes now instead of 10% taxes later?

i_am_the_slime

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Re: Should I be using Roth 401k in 15% bracket?
« Reply #4 on: August 10, 2013, 02:52:00 PM »
Personally, I am a huge fan of having both Traditional and Roth retirement accounts as a hedge on future tax rates.  Also, it allows additional flexibility to minimize taxes.  So, that said, I think it depends on what your mix currently is.  Could you do something like 75% Traditional 401k + 25% Roth 401k + Roth IRA?  Also keep in mind that employer contributions are ALWAYS into a "Traditional" 401k account.