The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: blackjack on December 05, 2015, 06:48:26 AM
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Roth or Traditional?
I make 80-100k / Wife makes 55-60k GROSS
When I retire I can receive 3200-3800 a month
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Traditional. Your marginal tax rate is going to be fairly high, unless there is something unusual.
Unless there is more information present, you should max in the following order:
1) 401k up to the maximum company match (for both you and your wife if available)
2) Traditional IRAs for each of you (for 2015 now, $5.5k each)
3) 401k up to the legal max ($18k for you, plus $18k for the wife, not counting company match)
Pick broad, low-cost index funds.
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thank or reply
you recommend traditional 401k and traditional IRA
i have both in ROTH right now....
my company does NO matching ( because they good good pension I'm assuming)
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I max out my roth IRA every year
would there be any benefit to having a traditional 401k and ROTH 401k and just have like 2-3% of my salary go into the roth 401k and and like 15% into trad. 401k?
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I max out my roth IRA every year
would there be any benefit to having a traditional 401k and ROTH 401k and just have like 2-3% of my salary go into the roth 401k and and like 15% into trad. 401k?
I don't see one. With your tax bracket, using a Traditional is probably more tax advantageous than Roth.
What is your state income tax? Will it be the same in retirement?
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i have no idea... here is a copy of my paycheck if that helps
11/22/2015 11/28/2015 2,200.61 / NET 1,203.54
FICA 136.44
FICA MEDICARE 31.91
FEDERAL TAX 470.54
ST TAX- PA 67.56
CITY 22.01
- CURRENT TOTALS 2,200.61
- TOTALS 731.00
- DEDUCTIONS
- ROTH 264.07
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As TomTX notes, given what you have mentioned traditional seems best for you. Is there something else that would cause you to use Roth from now on?
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thank or reply
you recommend traditional 401k and traditional IRA
i have both in ROTH right now....
my company does NO matching ( because they good good pension I'm assuming)
What do you mean, you're assuming? Go find out! That's important information for you to know!
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My wife and I have a similar combined income ($130-150k combined) and we do Traditional for both 401k and IRAs.
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s TomTX notes, given what you have mentioned traditional seems best for you. Is there something else that would cause you to use Roth from now on?
No; Honestly i don't really now much about anything when it comes to investing, but imp trying to learn; i always thought ROTH was best...
so due the fact most of the people here recommend TRADITIONAL 401k, i'll be switching my 401k from ROTH TO traditional and as of right now just leave my ROTH IRA alone..
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thank or reply
you recommend traditional 401k and traditional IRA
i have both in ROTH right now....
my company does NO matching ( because they good good pension I'm assuming)
What do you mean, you're assuming? Go find out! That's important information for you to know!
Based on what I have learned i should get between 3-4,000/month at age 57
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thank or reply
you recommend traditional 401k and traditional IRA
i have both in ROTH right now....
my company does NO matching ( because they good good pension I'm assuming)
What do you mean, you're assuming? Go find out! That's important information for you to know!
Based on what I have learned i should get between 3-4,000/month at age 57
Is your pension inflation indexed?
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NO; who knows what willl happen with the teamsters pension fund when i go to collect...
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I guess i always thought ROTH would be best because taxes could the super high in the future, so mine as well pay them now... am i wrong?
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I guess i always thought ROTH would be best because taxes could the super high in the future, so mine as well pay them now... am i wrong?
At the end of the day, the Roth vs Traditional debate always hinges on your tax rate in retirement.
If in fact there is a significant rise in tax rates in the future, then yes, it is possible that the Roth is better for you.
I personally don't think it will rise enough to that extent.
But what magnitude of tax rate increase are you assuming? You really should run the numbers to see if the Roth even makes any sense under your tax rate increase assumptions.
P.S. Roth is not an acronym. It's called a Roth after Senator William Roth who sponsored the legislation that established the Roth IRA.
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Traditional. Your marginal tax rate is going to be fairly high, unless there is something unusual.
Unless there is more information present, you should max in the following order:
1) 401k up to the maximum company match (for both you and your wife if available)
2) Traditional IRAs for each of you (for 2015 now, $5.5k each)
3) 401k up to the legal max ($18k for you, plus $18k for the wife, not counting company match)
Pick broad, low-cost index funds.
+1 for this.
But depending on their exact income OP may not be able to deduct IRA contributions
https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/2016-IRA-Contribution-and-Deduction-Limits-Effect-of-Modified-AGI-on-Deductible-Contributions-If-You-ARE-Covered-by-a-Retirement-Plan-at-Work
In that case use a Roth IRA. But max 401k
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^ thats what i'lll do keep my ROTH IRA and switch to a TRADITIONAL 401k for work
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what the tax advantage of a trad vs roth now?