Author Topic: traditional OR roth 401K w/ discretionary match  (Read 1860 times)

scooty006

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traditional OR roth 401K w/ discretionary match
« on: June 08, 2014, 08:29:46 AM »
My wife now has access to her company retirement plan and here are the options, we're trying to figure out the best route to take and any advice is appreciated.

First of all the company says it's a discretionary match (dollar for dollar) up to 6% and the past few years they have matched but they have the option not to match at the end of the year if they choose based on company performance.  Also, my wife can choose whether she wants it to be a traditional 401k or a roth 401k.

We are leaning toward the roth 401k because we're in a relatively low tax bracket plus even if they choose not to match, our contributions are in the roth 401k and we can still contribute to our Vanguard roth ira's separately.

I try to keep it simple with our individual Vanguard accounts and contribute to the Target Date 2045 (VTIVX) fund with a Rollover IRA and our Roth IRA's. The investment options she has with the employer plan don't look so great and here are a few I was considering.  I'm not overly concerned with asset allocation since this will be a small amount of $$ and a few years from now if she works at a different company it could possibly get rolled over to Vanguard anyway.

1. T. Rowe Price Retirement 2045 Fund (R) (RRTRX) = has 1.28% net exp ratio. (I thought target date funds were supposed to be low expenses?)
2. Columbia Small Cap Index Fund (A) (NMSAX) = has .48% net exp ratio.
3. Columbia Mid Cap Index Fund (A) (NTIAX) = has .46% net exp ratio, .67% total annual operating expenses.
4. T. Rowe Price Growth Stock Fund (adv) (TRSAX) = has .93% exp ratio.
Then a few other options at or above 1% expense ratio.

Would choosing the Roth 401k and splitting the 2 Columbia Index funds 50/50 be the best option?

scooty006

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Re: traditional OR roth 401K w/ discretionary match
« Reply #1 on: June 08, 2014, 07:32:27 PM »
Bueller?

FrugalSpendthrift

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Re: traditional OR roth 401K w/ discretionary match
« Reply #2 on: June 08, 2014, 08:01:11 PM »
The matching funds will probably end up as a traditional contribution, so you'll end up with some pre-tax and some post-tax.  The choice between the roth and traditional isn't clear, unless you have a really good crystal ball.  If the Roth seems to make sense, just run with it and revisit that decision next year.

The low expense ratio choices are very sensible.