Author Topic: Roth 401K and traditional to Roth conversion  (Read 937 times)

Indio

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foobar

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Re: Roth 401K and traditional to Roth conversion
« Reply #1 on: March 19, 2014, 09:22:34 AM »
Sure 5k in a roth is more than 5k in a tIRA. However the assumption is the big spender doesn't realize that they can take that 5k out of the roth at anytime and spend it. So in reality in 30 years the ROTH will be worth almost 0. ROTH versus tIRA is going to be all about your tax situation in retirement and your returns.


Interesting article in WSJ that looks at how taxes could impact retirement savings. Anybody agree or disagree with the findings?

http://online.wsj.com/news/articles/SB10001424052702303795904579431212070646376?mod=WSJ_FamilyFinance_FamilyFinance_2&mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303795904579431212070646376.html%3Fmod%3DWSJ_FamilyFinance_FamilyFinance_2

FrugalSpendthrift

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Re: Roth 401K and traditional to Roth conversion
« Reply #2 on: March 19, 2014, 11:03:53 AM »
Interesting article in WSJ that looks at how taxes could impact retirement savings. Anybody agree or disagree with the findings?

I don't think that is really a fair comparison.  I don't disagree with their numbers, it's just they are actually comparing different levels of contribution and making it seem like the outcome is because of the type of account.  Contribution $5,000 to a Roth is actually allocating more of your resources to a retirement account, then contributing $5,000 to a traditional 401k or IRA.  The title could also read, 'Can't Save? Change your contribution percentage instead of blowing your refund on vacation.'

Brian the saver just choose to pay extra tax on his investments.  There should be a forth hypothetical investor, let's call him Pete the mustache, who reduces his tax withholding and increase his 401k contribution up to $6,944.