Author Topic: Pre-tax or Roth 457?  (Read 322 times)

dabighen

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Pre-tax or Roth 457?
« on: March 10, 2019, 07:13:58 PM »
Hi all,

Just started a new job and I chose to begin contributing to Roth 457 and my gut is telling me I should switch to Traditional to FIRE by age 40.

We have:

$250k roth IRA/TSP
$100k traditional
$50K taxable

Pretty much all in a fidelity total us stock index fund.  Have about 20k BP stock.

We are 34yo combined income of $100k and hope to fire in 5-7 years.  I am leaning towards switching to traditional because of the penalty free early withdrawl 457 offers.  We went with Roth initially to take advantage of our  child tax advantage today (we have 4 kids 7,4,2, 1).

Still torn, thoughts?

Matt
« Last Edit: March 10, 2019, 07:25:23 PM by dabighen »

seattlecyclone

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Re: Pre-tax or Roth 457?
« Reply #1 on: March 10, 2019, 08:04:59 PM »
For a 457, pre-tax all the way. Pre-tax 457 accounts are unique in that you can start withdrawing the day after you retire and you just pay the tax on your withdrawals, no 10% early withdrawal tax or need to roll it over to Roth and wait five years. Early withdrawals from a Roth 457 are much less appealing.

MDM

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Re: Pre-tax or Roth 457?
« Reply #2 on: March 11, 2019, 09:34:35 AM »
We went with Roth initially to take advantage of our  child tax advantage today (we have 4 kids 7,4,2, 1).
What is your current marginal tax saving rate for traditional contributions?  If very low (even if you are paying some tax), Roth is preferable.  If high (even if you pay no tax and receive a credit), traditional is preferable.

Also check the details of your company's 457.  Although the IRS will allow you to take partial withdrawals, some company plans require you to take all or none.

degrom7

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Re: Pre-tax or Roth 457?
« Reply #3 on: March 11, 2019, 01:55:39 PM »
Definitely go pre tax if you plan to FIRE by 40. No penalties for either option if you resign from your job. What makes roth an awful idea is you pay taxes when you contribute AND you pay it again when you withdraw if you do this before age 59.5.


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