Roth 401k vs Traditional 401k

[jscott2135]

Family of 4. Current salary is 165k/annually. DH is 42, I am retired/SAHM.  We had a couple rough years so our retirement isn't where it should be but currently we have

47k in a Voya traditional 401k account
210k in a Vangaurd IRA
9k in Vangaurd Roth IRA

We do contribute the full 15%. Beginning in 2019 the company will offer a choice of how we invest our retirement, with a 6% match we can choose a Roth 401k or stay with our traditional 401k. I am having difficulty in deciding which one is best for our situation.  Any advice from you pros ;) ?!

[aceyou]

Here's how I'd look at it:

• The 12% Federal tax bracket is $77,400
• The standard deduction is $24,000
• That adds up to $101,400
• So, you will pay $8,907 on your first $101,400
• But wait, you have two dependants, so two child tax credits at 2k each means $4,000 in tax credits
• So, I belive in your situation you will pay $4,907 in federal taxes on your first $101,400.  Those are the cheapest taxes you are EVER going to get IMO.

So, If I were you, I'd:

• Figure out how much you'll be able to deduct
• Figure out how much more you'll need to deduct to get your AGI down to $101,400
• Put that amount into a 401k
• Put everything else into a Roth 401k, because at that point, you might as well pay taxes now since they'll be so cheap

What do you think?[/list]

[MDM]

Family of 4. Current salary is 165k/annually. DH is 42, I am retired/SAHM.

47k in a Voya traditional 401k account
210k in a Vangaurd IRA

With that income you are likely in the 22% federal bracket.

Without a pension or other "guaranteed" income in retirement, it would take ~$2.5 million in traditional accounts before you would reach the 22% bracket using a 4% withdrawal ratio.

Until you think your retirement income will put you in the 22% bracket, put as much into traditional accounts as you can: the 401k and a spousal tIRA.  DH can use a Roth IRA.


P.S.  What do you mean by "...the full 15%?"