Author Topic: Confused on which 401k to fund  (Read 4007 times)

blackjack

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Confused on which 401k to fund
« on: December 05, 2015, 06:48:26 AM »
Roth or Traditional?
I make 80-100k / Wife makes 55-60k  GROSS
When I retire I can receive 3200-3800 a month

TomTX

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Re: Confused on which 401k to fund
« Reply #1 on: December 05, 2015, 07:25:00 AM »
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.

blackjack

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Re: Confused on which 401k to fund
« Reply #2 on: December 05, 2015, 07:28:19 AM »
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)

blackjack

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Re: Confused on which 401k to fund
« Reply #3 on: December 05, 2015, 12:15:45 PM »
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?
« Last Edit: December 05, 2015, 12:18:27 PM by blackjack »

TomTX

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Re: Confused on which 401k to fund
« Reply #4 on: December 05, 2015, 04:57:42 PM »
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?

blackjack

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Re: Confused on which 401k to fund
« Reply #5 on: December 05, 2015, 05:49:31 PM »
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
-                                           

MDM

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Re: Confused on which 401k to fund
« Reply #6 on: December 05, 2015, 09:06:39 PM »
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?

johnny847

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Re: Confused on which 401k to fund
« Reply #7 on: December 05, 2015, 09:22:46 PM »
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!

GGNoob

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Re: Confused on which 401k to fund
« Reply #8 on: December 05, 2015, 09:53:54 PM »
My wife and I have a similar combined income ($130-150k combined) and we do Traditional for both 401k and IRAs.

blackjack

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Re: Confused on which 401k to fund
« Reply #9 on: December 06, 2015, 11:42:18 AM »
Quote
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..


blackjack

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Re: Confused on which 401k to fund
« Reply #10 on: December 06, 2015, 11:42:53 AM »
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

johnny847

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Re: Confused on which 401k to fund
« Reply #11 on: December 06, 2015, 12:09:29 PM »
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?

blackjack

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Re: Confused on which 401k to fund
« Reply #12 on: December 06, 2015, 12:32:36 PM »
NO; who knows what willl happen with the teamsters pension fund when i go to collect...

blackjack

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Re: Confused on which 401k to fund
« Reply #13 on: December 06, 2015, 05:36:12 PM »
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?

johnny847

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Re: Confused on which 401k to fund
« Reply #14 on: December 06, 2015, 05:45:12 PM »
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.

Scandium

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Re: Confused on which 401k to fund
« Reply #15 on: December 07, 2015, 11:17:33 AM »
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

blackjack

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Re: Confused on which 401k to fund
« Reply #16 on: December 12, 2015, 06:14:13 AM »
^ thats what i'lll do keep my ROTH IRA and switch to a  TRADITIONAL 401k for work

blackjack

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Re: Confused on which 401k to fund
« Reply #17 on: December 17, 2015, 05:44:07 AM »
what the tax advantage of a trad vs roth now?