Author Topic: When did you switch from Roth to traditional?  (Read 10357 times)

ysette9

  • Magnum Stache
  • ******
  • Posts: 4561
  • Location: Bay Area, CA
    • Insert Snappy Title Here (Journal)
When did you switch from Roth to traditional?
« on: January 07, 2015, 02:43:03 PM »
I'm reading more and more on traditional vs. Roth 401(k) and starting to think we should switch our Roth contributions to traditional. I gladly jumped on the Roth 401(k) bandwagon early in my career when it was first made available by my employer and haven't re-thought that decision since. In the meantime I have gotten married and our incomes have gone up.

I have checked out a few calculators online comparing Roth vs. 401(k) and the numbers seem to be relatively close, depending on variables and assumptions, though the traditional seems to come out ahead. I have a personal fear of tax rates going up in the future since they are at historical lows now. Clearly no one can predict the future, but I am trying to quantify how much it means to me to have the tax security of the Roth.

A few details:
Age: 33 (me) /34 (him)
Household income: $135k (me)/$150k (him) = $285k/yr
Retirement savings: each maxing out Roth 401(k), individual balances of 401(k) + IRAs each at ~ $260k
Other savings: on track to save $50k this year in Vanguard Total Market

Hoping to retire in 10 years from now (fingers crossed).

Philociraptor

  • Pencil Stache
  • ****
  • Posts: 919
  • Age: 29
  • Location: DFW, TX
  • Eat. Sleep. Invest. Repeat.
Re: When did you switch from Roth to traditional?
« Reply #1 on: January 07, 2015, 02:51:08 PM »
Looks like y'all are riding in the 33% marginal bracket? If you used traditional 401(k)'s you'd save quite a bit on taxes this year: $36000*33% = $11,880. Do you really believe your EFFECTIVE tax rate in retirement is going to be above 33%? If not, traditional is going to be the better option. Does either of y'all employers offer after-tax (non-Roth) contributions to 401(k)? If they do and also offer in-service conversions or in-service distributions your tax advantaged space increases to $53k per person via the Backdoor Roth strategy!
« Last Edit: January 07, 2015, 02:54:47 PM by Philociraptor »

ysette9

  • Magnum Stache
  • ******
  • Posts: 4561
  • Location: Bay Area, CA
    • Insert Snappy Title Here (Journal)
Re: When did you switch from Roth to traditional?
« Reply #2 on: January 07, 2015, 02:54:36 PM »
Likely not, assuming again that the tax code doesn't change between now and the rest of my retirement. :) That is part of my risk-aversion showing through. It does seem more and more apparent that we have crossed over some threshold where going traditional makes more sense. It is easy to make these decisions and then forget to revisit them as circumstances change.

Cheddar Stacker

  • Magnum Stache
  • ******
  • Posts: 3714
  • Age: 40
  • Location: USA
Re: When did you switch from Roth to traditional?
« Reply #3 on: January 07, 2015, 03:04:23 PM »
Likely not, assuming again that the tax code doesn't change between now and the rest of my retirement. :) That is part of my risk-aversion showing through. It does seem more and more apparent that we have crossed over some threshold where going traditional makes more sense. It is easy to make these decisions and then forget to revisit them as circumstances change.

Tax code changes can go both ways. Many people who share your fears of tax reform believe Roth's will eventually be taxed. I don't share those fears, just pointing it out.

But what's better, saving $0.33 today or hoping you save more than that tomorrow? I'll take the bird in the hand.

If you made half that income I would advise Traditional, and I have done so to clients making half that income. If you stick with Roth's you are speculating IMHO.

In case you haven't read this yet: http://www.madfientist.com/retire-even-earlier/

After reading those hopefully you can uncross your fingers and pull in that target from 10 years to 8. Congrats on the awesome income!  : )

Gone Fishing

  • Magnum Stache
  • ******
  • Posts: 2741
  • So Close went fishing on April 1, 2016
    • Journal
Re: When did you switch from Roth to traditional?
« Reply #4 on: January 07, 2015, 03:12:02 PM »
I stayed on the ROTH (IRA and 401(k))bandwagon for waaaay too long and consider it to be one of my biggest financial mistakes on my ER journey.  Probably cost me $20,000 in taxes that I didn't need to pay plus earnings, so call it closer to 40-50k in today's money.  Switch to traditonal TODAY.  With your existing ROTH balances you will be able to "customize" your taxes quite easily from year to year in retirement. 

Others check me, but I think you can still do a back door ROTH IRA and tuck away $11k in a ROTH in addition to your 401(k).  Just be sure to understand what you are doing if you go this route because you can make a documentation nightmare if you aren't careful.
« Last Edit: January 07, 2015, 03:15:59 PM by So Close »

skyrefuge

  • Handlebar Stache
  • *****
  • Posts: 1007
  • Location: Suburban Chicago, IL
Re: When did you switch from Roth to traditional?
« Reply #5 on: January 07, 2015, 03:34:20 PM »
It does seem more and more apparent that we have crossed over some threshold where going traditional makes more sense.

I believe the desire for an early retirement is an even more important factor in the decision to go traditional than any income threshold that you may have crossed. It's entirely possible that traditional would have been the optimal choice for your entire working career, but unfortunately you could only know that once you knew that you wanted to pursue low-expense early-retirement.

Even at income levels much lower than yours, traditional likely makes more sense for most Mustachians, because their income in retirement will be so low that they'll barely be taxed at all. So for the prototypical Mustachian, the answer to your question would be "I switched when I realized I would be retiring early" rather than "I switched at some particular income level".

Even if tax rates rise in general (which I agree they probably will), how much do you think they'll rise on "poor" Americans (which is what most low-expense Mustachians will be from the IRS's perspective)? Probably not enough to reach even a 25% effective rate.

ysette9

  • Magnum Stache
  • ******
  • Posts: 4561
  • Location: Bay Area, CA
    • Insert Snappy Title Here (Journal)
Re: When did you switch from Roth to traditional?
« Reply #6 on: January 07, 2015, 03:42:49 PM »
@Cheddar Stacker - thanks for the article. I think I have skimmed it in the distant past but I'll look at it again in more detail now. We are above the income limit for being able to contribute to IRAs (that happened when we got married) but we are trying hard to invest outside of retirement accounts so I think it isn't that big of a loss. I have noticed on multiple fronts that the tax code and other laws seem to give the shaft to dual income households where both spouses earn about the same amount. My personal opinion is that the lawmakers are stuck in an outdated one-working-spouse or one main-breadwinner model that doesn't necessarily reflect the current reality. That is off topic though!

dandarc

  • Magnum Stache
  • ******
  • Posts: 3358
  • Age: 36
Re: When did you switch from Roth to traditional?
« Reply #7 on: January 07, 2015, 03:43:06 PM »
This time last year is when we jumped on the Traditional bandwagon.  Wish we had done so earlier - made the Roth decision when I was still on a "save a little and work a long time" plan.

dandarc

  • Magnum Stache
  • ******
  • Posts: 3358
  • Age: 36
Re: When did you switch from Roth to traditional?
« Reply #8 on: January 07, 2015, 03:45:52 PM »
It does seem more and more apparent that we have crossed over some threshold where going traditional makes more sense.

I believe the desire for an early retirement is an even more important factor in the decision to go traditional than any income threshold that you may have crossed. It's entirely possible that traditional would have been the optimal choice for your entire working career, but unfortunately you could only know that once you knew that you wanted to pursue low-expense early-retirement.

Even at income levels much lower than yours, traditional likely makes more sense for most Mustachians, because their income in retirement will be so low that they'll barely be taxed at all. So for the prototypical Mustachian, the answer to your question would be "I switched when I realized I would be retiring early" rather than "I switched at some particular income level".

Even if tax rates rise in general (which I agree they probably will), how much do you think they'll rise on "poor" Americans (which is what most low-expense Mustachians will be from the IRS's perspective)? Probably not enough to reach even a 25% effective rate.
+1 to this.

Hey It's Me

  • Pencil Stache
  • ****
  • Posts: 715
    • Moe's Journal
Re: When did you switch from Roth to traditional?
« Reply #9 on: January 07, 2015, 04:08:05 PM »
Yeah, it's time to go traditional on those 401ks. Philociraptor's calculations of the extra taxes you're paying by going Roth are correct, you would save $11,880 this year in taxes by contributing to traditional 401ks, rather than the Roth. The other ~$14K you're projecting to save this year can go to taxable accounts. (Or after-tax accounts, as another poster mentioned.)

ysette9

  • Magnum Stache
  • ******
  • Posts: 4561
  • Location: Bay Area, CA
    • Insert Snappy Title Here (Journal)
Re: When did you switch from Roth to traditional?
« Reply #10 on: January 07, 2015, 04:34:36 PM »
Looks like y'all are riding in the 33% marginal bracket? If you used traditional 401(k)'s you'd save quite a bit on taxes this year: $36000*33% = $11,880. Do you really believe your EFFECTIVE tax rate in retirement is going to be above 33%? If not, traditional is going to be the better option. Does either of y'all employers offer after-tax (non-Roth) contributions to 401(k)? If they do and also offer in-service conversions or in-service distributions your tax advantaged space increases to $53k per person via the Backdoor Roth strategy!

I just read the second part of this. My employer does offer after-tax contributions. I don't know about the in-service conversions or distributions. I haven't heard of those before so I need to educate myself. If you have any articles you particularly recommend, I would appreciate the pointer.

brooklynguy

  • Handlebar Stache
  • *****
  • Posts: 2207
  • Age: 38
Re: When did you switch from Roth to traditional?
« Reply #11 on: January 07, 2015, 06:29:10 PM »
I just read the second part of this. My employer does offer after-tax contributions. I don't know about the in-service conversions or distributions. I haven't heard of those before so I need to educate myself. If you have any articles you particularly recommend, I would appreciate the pointer.

The best summary once again comes courtesy of the Mad Fientist:

http://www.madfientist.com/after-tax-contributions/

Note that this strategy is actually referred to as the Mega Backdoor Roth, and should not be confused with the regular Backdoor Roth.


ysette9

  • Magnum Stache
  • ******
  • Posts: 4561
  • Location: Bay Area, CA
    • Insert Snappy Title Here (Journal)
Re: When did you switch from Roth to traditional?
« Reply #12 on: January 08, 2015, 10:12:14 AM »
Excellent summary. Thank you for providing the link. I am looking into whether my employer offers in-service distributions to roll over after-tax 401(k) contributions into a Roth IRA. One question that this article didn't seem to be addressed though: is this rollover scheme subject to the same income limitations as regular Roth IRA contributions?

brooklynguy

  • Handlebar Stache
  • *****
  • Posts: 2207
  • Age: 38
Re: When did you switch from Roth to traditional?
« Reply #13 on: January 08, 2015, 10:57:16 AM »
One question that this article didn't seem to be addressed though: is this rollover scheme subject to the same income limitations as regular Roth IRA contributions?

Nope - hence the "backdoor" moniker.  If your entrance to the Roth IRA through the front door is blocked by income limitations, you can still gain access through the back door.

ysette9

  • Magnum Stache
  • ******
  • Posts: 4561
  • Location: Bay Area, CA
    • Insert Snappy Title Here (Journal)
Re: When did you switch from Roth to traditional?
« Reply #14 on: January 08, 2015, 03:26:28 PM »
I just spent a day excitedly learning everything I could about after-tax 401(k) contributions and IRA rollovers and the like. Then I stumbled upon the fact that the after-tax contributions are subject to the "highly compensated employee" limitations that I fall under. The goods news is that I am now more educated about what is out there; the bad news is that I cannot take advantage of it.

I did switch my 401(k) to traditional this morning though so now I will end up with a mix once we do hit retirement. Whatever else happens, it is probably good to be tax-diversified.

Thanks for all of the education.

WYOGO

  • Stubble
  • **
  • Posts: 155
  • Location: Salt Lake City
  • Great Basin
Re: When did you switch from Roth to traditional?
« Reply #15 on: January 08, 2015, 08:54:56 PM »
...I stumbled upon the fact that the after-tax contributions are subject to the "highly compensated employee" limitations that I fall under. The goods news is that I am now more educated about what is out there; the bad news is that I cannot take advantage of it.

Are you certain this is not simply restricted to a percentage limitation like 10-20% of salary. That is the arrangement I am under in my 401K.

ysette9

  • Magnum Stache
  • ******
  • Posts: 4561
  • Location: Bay Area, CA
    • Insert Snappy Title Here (Journal)
Re: When did you switch from Roth to traditional?
« Reply #16 on: January 09, 2015, 10:02:59 AM »
You are correct: it is limited to a percentage of my salary. It is just that when I do the calculations, the limit they have imposed on me is low enough that I could barely contribute much to an after-tax 401(k) after maxing out my regular 401(k) contributions. I don't think that small amount of $ would be worth the time and effort to go through the hoops.

WYOGO

  • Stubble
  • **
  • Posts: 155
  • Location: Salt Lake City
  • Great Basin
Re: When did you switch from Roth to traditional?
« Reply #17 on: January 09, 2015, 12:46:37 PM »
You are correct: it is limited to a percentage of my salary. It is just that when I do the calculations, the limit they have imposed on me is low enough that I could barely contribute much to an after-tax 401(k) after maxing out my regular 401(k) contributions. I don't think that small amount of $ would be worth the time and effort to go through the hoops.

Makes sense, I am limited too but will take adavantage of it. Every dollar additional I can get into my Roth now prevents conversions I have to do later. Best of luck.

J

  • 5 O'Clock Shadow
  • *
  • Posts: 21
Re: When did you switch from Roth to traditional?
« Reply #18 on: January 10, 2015, 04:54:39 PM »
I've avoided traditional IRAs for two reasons:

First, the mandatory minimum distributions.  In retirement, my income should precisely match my expenses, since it's coming from savings.  The minimum withdrawal amounts from an IRA are much higher than my projected expenses.

And second, I intend to retire decades before an IRA would become available, and I don't want to lock any substantial fraction of my retirement behind a "do not open until this age" barrier.

Cheddar Stacker

  • Magnum Stache
  • ******
  • Posts: 3714
  • Age: 40
  • Location: USA
Re: When did you switch from Roth to traditional?
« Reply #19 on: January 10, 2015, 06:56:14 PM »
I've avoided traditional IRAs for two reasons:

First, the mandatory minimum distributions.  In retirement, my income should precisely match my expenses, since it's coming from savings.  The minimum withdrawal amounts from an IRA are much higher than my projected expenses.

And second, I intend to retire decades before an IRA would become available, and I don't want to lock any substantial fraction of my retirement behind a "do not open until this age" barrier.

Hey J, do yourself a favor and read those linked articles above. You can access the $ much sooner than you think. If you do it right you will never have to take an RMD (minimum withdrawal) and you will likely pay a lot less tax over the course of your life. Or don't, whatever.

drtownhouse

  • 5 O'Clock Shadow
  • *
  • Posts: 41
Re: When did you switch from Roth to traditional?
« Reply #20 on: January 10, 2015, 08:30:14 PM »
I must be missing something. According to the IRS, a married filing jointly couple with access to employer retirement plans (401k) cannot utilize a traditional IRA deduction if their modified AGI is greater than $118,000.

http://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-Covered-by-a-Retirement-Plan-at-Work

I don't understand how traditional IRAs work for couples at OPs income level. My wife and I are over $118,000 and have invested in Roth IRAs because of the aforementioned limit. Basically, what is the point of a traditional IRA if your $6,000 contribution cannot be deducted. My reading is that this means you are not making pre-tax contributions, because the $6,000 is not deductible and will in fact be taxed. You can use the Roth conversion ladder later on to avoid taxes on the other end (when you are 59 and 1/2), but that doesn't get rid of the taxes you paid because your contribution was not deductible.





drtownhouse

  • 5 O'Clock Shadow
  • *
  • Posts: 41
Re: When did you switch from Roth to traditional?
« Reply #21 on: January 10, 2015, 08:42:29 PM »
I must be missing something. According to the IRS, a married filing jointly couple with access to employer retirement plans (401k) cannot utilize a traditional IRA deduction if their modified AGI is greater than $118,000.

http://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-Covered-by-a-Retirement-Plan-at-Work

I don't understand how traditional IRAs work for couples at OPs income level. My wife and I are over $118,000 and have invested in Roth IRAs because of the aforementioned limit. Basically, what is the point of a traditional IRA if your $6,000 contribution cannot be deducted. My reading is that this means you are not making pre-tax contributions, because the $6,000 is not deductible and will in fact be taxed. You can use the Roth conversion ladder later on to avoid taxes on the other end (when you are 59 and 1/2), but that doesn't get rid of the taxes you paid because your contribution was not deductible.

The following exchange on the Mad Fientist's blog seems relevant:

Kristin
December 13, 2013 at 4:51 pm
Loved this article. I checked out the PT Money article you posted. We are married and filing jointly. Our combined income is $150,000. We both max out our employers plan. This quote by PT money caught my eye:
“If you file your taxes as Married Filing Jointly or as a Qualifying Widower in 2013, your income needs to be below $95,000 for you to be able to fully deduct your contributions to a Traditional IRA. If your MAGI is between $95,000 – $115,000 then you are in the “phase-out” range and the amount you can deduct starts “phasing out”. At $115,000 you are unable to deduct the contributions you make to a Traditional IRA.”

So… How do I go about figuring out if a Roth or a traditional IRA will earn more in this situation?

Reply

The Mad Fientist
December 15, 2013 at 3:52 pm
Sorry for the delayed reply, Kristin; I’ve been out of commission for the past few days and haven’t been on my computer much.

If you make too much to deduct contributions to a Traditional IRA, your best bet would be to contribute directly to a Roth IRA. That’s actually the situation I’m in so I just max out my Roth every year.

http://forum.mrmoneymustache.com/index.php?action=post;quote=513096;topic=29402.0

Philociraptor

  • Pencil Stache
  • ****
  • Posts: 919
  • Age: 29
  • Location: DFW, TX
  • Eat. Sleep. Invest. Repeat.
Re: When did you switch from Roth to traditional?
« Reply #22 on: January 11, 2015, 07:38:40 AM »
I must be missing something. According to the IRS, a married filing jointly couple with access to employer retirement plans (401k) cannot utilize a traditional IRA deduction if their modified AGI is greater than $118,000.

http://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-Covered-by-a-Retirement-Plan-at-Work

I don't understand how traditional IRAs work for couples at OPs income level. My wife and I are over $118,000 and have invested in Roth IRAs because of the aforementioned limit. Basically, what is the point of a traditional IRA if your $6,000 contribution cannot be deducted. My reading is that this means you are not making pre-tax contributions, because the $6,000 is not deductible and will in fact be taxed. You can use the Roth conversion ladder later on to avoid taxes on the other end (when you are 59 and 1/2), but that doesn't get rid of the taxes you paid because your contribution was not deductible.

The following exchange on the Mad Fientist's blog seems relevant:

Kristin
December 13, 2013 at 4:51 pm
Loved this article. I checked out the PT Money article you posted. We are married and filing jointly. Our combined income is $150,000. We both max out our employers plan. This quote by PT money caught my eye:
“If you file your taxes as Married Filing Jointly or as a Qualifying Widower in 2013, your income needs to be below $95,000 for you to be able to fully deduct your contributions to a Traditional IRA. If your MAGI is between $95,000 – $115,000 then you are in the “phase-out” range and the amount you can deduct starts “phasing out”. At $115,000 you are unable to deduct the contributions you make to a Traditional IRA.”

So… How do I go about figuring out if a Roth or a traditional IRA will earn more in this situation?

Reply

The Mad Fientist
December 15, 2013 at 3:52 pm
Sorry for the delayed reply, Kristin; I’ve been out of commission for the past few days and haven’t been on my computer much.

If you make too much to deduct contributions to a Traditional IRA, your best bet would be to contribute directly to a Roth IRA. That’s actually the situation I’m in so I just max out my Roth every year.

http://forum.mrmoneymustache.com/index.php?action=post;quote=513096;topic=29402.0
You are missing something. OP is taking about 401(k), not IRA.

drtownhouse

  • 5 O'Clock Shadow
  • *
  • Posts: 41
Re: When did you switch from Roth to traditional?
« Reply #23 on: January 11, 2015, 07:42:28 AM »
I must be missing something. According to the IRS, a married filing jointly couple with access to employer retirement plans (401k) cannot utilize a traditional IRA deduction if their modified AGI is greater than $118,000.

http://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-Covered-by-a-Retirement-Plan-at-Work

I don't understand how traditional IRAs work for couples at OPs income level. My wife and I are over $118,000 and have invested in Roth IRAs because of the aforementioned limit. Basically, what is the point of a traditional IRA if your $6,000 contribution cannot be deducted. My reading is that this means you are not making pre-tax contributions, because the $6,000 is not deductible and will in fact be taxed. You can use the Roth conversion ladder later on to avoid taxes on the other end (when you are 59 and 1/2), but that doesn't get rid of the taxes you paid because your contribution was not deductible.

The following exchange on the Mad Fientist's blog seems relevant:

Kristin
December 13, 2013 at 4:51 pm
Loved this article. I checked out the PT Money article you posted. We are married and filing jointly. Our combined income is $150,000. We both max out our employers plan. This quote by PT money caught my eye:
“If you file your taxes as Married Filing Jointly or as a Qualifying Widower in 2013, your income needs to be below $95,000 for you to be able to fully deduct your contributions to a Traditional IRA. If your MAGI is between $95,000 – $115,000 then you are in the “phase-out” range and the amount you can deduct starts “phasing out”. At $115,000 you are unable to deduct the contributions you make to a Traditional IRA.”

So… How do I go about figuring out if a Roth or a traditional IRA will earn more in this situation?

Reply

The Mad Fientist
December 15, 2013 at 3:52 pm
Sorry for the delayed reply, Kristin; I’ve been out of commission for the past few days and haven’t been on my computer much.

If you make too much to deduct contributions to a Traditional IRA, your best bet would be to contribute directly to a Roth IRA. That’s actually the situation I’m in so I just max out my Roth every year.

http://forum.mrmoneymustache.com/index.php?action=post;quote=513096;topic=29402.0
You are missing something. OP is taking about 401(k), not IRA.

My bad. Think my oversight was related to my experience of often seeing discussions on IRAs that do not mention the important facts on limits. I may have missed it in the Mad Fientist's article, but if not, it only came up in the comments.

Yankuba

  • Handlebar Stache
  • *****
  • Posts: 1357
  • Location: Long Island, NY
Re: When did you switch from Roth to traditional?
« Reply #24 on: January 11, 2015, 01:21:44 PM »
I just want to throw it out there that for many people you can split the difference and contribute to both the Roth 401K and Traditional 401K each pay period. After agonizing about Roth vs. Traditional and running the calculations using the various online calculators I decided to split the difference - half my 401K contributions go to the traditional and half go to the Roth.

By splitting the contributions you don't have to worry that you made the wrong call.

Personally, I think that although U.S. marginal tax rates have been declining since WWII the opposite will happen as we move forward in time. Higher taxes for those with means and I wouldn't be shocked if we see an experiment with wealth (not income) taxes over the next several decades. So people with low incomes but huge 'staches (including 401K assets) will be taxed as if they had large incomes. We shall see....

forummm

  • Walrus Stache
  • *******
  • Posts: 7355
  • Senior Mustachian
Re: When did you switch from Roth to traditional?
« Reply #25 on: January 11, 2015, 04:16:25 PM »
I just want to throw it out there that for many people you can split the difference and contribute to both the Roth 401K and Traditional 401K each pay period. After agonizing about Roth vs. Traditional and running the calculations using the various online calculators I decided to split the difference - half my 401K contributions go to the traditional and half go to the Roth.

By splitting the contributions you don't have to worry that you made the wrong call.

You don't need to worry, because you know you made the wrong call with half your money.

kpd905

  • Handlebar Stache
  • *****
  • Posts: 1710
Re: When did you switch from Roth to traditional?
« Reply #26 on: January 11, 2015, 04:32:20 PM »
My choice is to go traditional as long as I have any income in the 25% federal bracket.  I also have about a 6.5% state income tax at my marginal rate.

MrFrugalChicago

  • Bristles
  • ***
  • Posts: 340
Re: When did you switch from Roth to traditional?
« Reply #27 on: January 11, 2015, 05:40:12 PM »
I have been going 1/2 and 1/2 (basically) as much as I can.

So first 10k goes in roth for wife and I. Then 10k in IRA. This may be the first year I need to worry about how to deal with the excess...

seems more flexible to do a little of both. Will roth hurt my retirement date? Maybe. But I can think of not being forced to take distributions from it, for example, that make it worth a lot down the road.

OneCoolCat

  • Bristles
  • ***
  • Posts: 438
  • Age: 32
  • Location: SoFla
Re: When did you switch from Roth to traditional?
« Reply #28 on: January 11, 2015, 06:45:03 PM »
I still can't figure out whether a Traditional or Roth IRA and 401k would be best for me with my goals.  I'm 27 years old with zero investments currently but I will have about 35k in 2015 to max out my IRAs (this year and last) and 401k, the rest will go to pay off my student loans quicker.  I don't know whether I will retire early but my goal is to have way more saved up than necessary to live off of.  Both Traditional and Roth have their benefits but its just impossible to know whether which will give me better tax benefits in the long run.

CorpRaider

  • Bristles
  • ***
  • Posts: 394
    • The Corpraider Blog
Re: When did you switch from Roth to traditional?
« Reply #29 on: January 13, 2015, 01:14:20 PM »
Most people should look really really hard at the traditional options, when available; as cheddar and the fientist have pointed out.  Accelerating taxes is rarely ever a good idea.  Certainly not in the $300K tax bracket with plans to FIRE and the ACA tax coming to bear this year.
« Last Edit: January 13, 2015, 01:16:16 PM by CorpRaider »