The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: cash2001 on January 10, 2017, 01:56:35 PM
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Hi - I recently took a pay cut to live in Hawaii (worth it). I am a 31/f with 24k in a Roth IRA through Vanguard. Luckily, I just barely am in the 15% tax bracket. My workplace does NOT offer any kind of match for their 401k but I am putting away 15% of my #32k salary per month plus an additional $250 per month into my Roth. Would there be a benefit to cancel the 401k with no match and aim for putting $450 a month straight into the Vanguard Roth? I also purchase some individual stocks through Motif with income from my side hustle. Thanks all for your thoughts
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Do you expect to be in the 15% marginal tax bracket most of your career? Or do you expect to get into the 25% marginal tax bracket?
If you expect to stay in the 15% marginal tax bracket most of your career, it's likely a wash and doesn't matter. If you expect to be in a higher marginal tax bracket later on in your career (or in retirement), then you should likely contribute to roth now.
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Put $2K into a traditional account (either IRA or 401k) and you will save 25% on that due to the saver's credit.
Note that this assumes your AGI would be exactly $32K w/o the traditional contribution. You have to get your AGI to $30,000 or below (2016 numbers) to get this credit - at $30,001 you don't get it.
Past the $2K amount Roth might be better, as noted by other posters.