Hi All!
I have recently switched jobs and now find myself with the need to roll over my first 401k. From the research I have done and the reading on MMM, I know that I would like to roll over to Vanguard, and that I would like to invest in VTSMX, at least until I hit $10K and can switch to admiral shares.
However, I am a bit stuck on whether a Roth or Traditional IRA is the best choice for me right now. I am currently in the 25% bracket, but don't know how old I will be or what I will be making when I retire. My plan at this point is loosely as follows:
-Pay off student loans this year ($16,000 remaining)
-Work for the next ~10 years (approx) building up my savings to FI
-Leave the traditional workforce by my mid-30s (24 now) presumably to do freelance work or consulting, while semi-retired
I am not currently maxing out my 401K as the fees are quite high, but am contributing to get my company match. Using that extra money to pay off student loans quickly, but once the loans are paid I do plan to contribute up to the max for 401K.
I am assuming that because I am in one of the lower tax brackets now, it would make sense for me to go the Roth route and pay the taxes now, allowing my money to grow later. Can anyone advise whether this makes sense?
Also, have a few other questions about the logistics:
-With either option, will the money that I am rolling over (~$5,900) count as my 2015 contribution, or will I be able to add another $5,500 on top of the money rolled over?
-If I have more than $5,500 to roll over, where does the extra money go-just into a normal mutual fund?
-Will I need to pay that 25% tax next April, so need to put aside money for it?
I also plan to call Vanguard to discuss this, but want to be sure I am not going in blind and get sold on something that doesn't make sense for me. Help is appreciated!