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Learning, Sharing, and Teaching => Investor Alley => Topic started by: BlueDove on December 16, 2017, 05:46:34 PM

Title: Roth or traditional
Post by: BlueDove on December 16, 2017, 05:46:34 PM

Hello,

I am self-employed and have a solo401k with Vanguard with an option for a Roth401k.  I have money saved up and I'm ready to contribute for this year.  I am inclined to put it all into the traditional 401k, but I have nagging doubts about not putting anything into the Roth side.

I plan to FIRE in 10 years at age 58, and probably could last on stuff other than 401k until 59.5.

I believe my tax rate will be lower when I pull it out. 
Marginal tax rate now: 25% Federal, 7% state (actively earning money, mortgage tax deduction)
Marginal tax rate at FIRE: 15%, 6% state (keep expenses low, lose mortgage tax deduction)

So from what I've read, because of this, I should not do Roth. 

Anything else to think about?  Any other data that's relevant before dumping it all into traditional 401k? 

Thank you. 

Title: Re: Roth or traditional
Post by: BlueDove on December 16, 2017, 05:57:33 PM

and next year I will have 28% marginal tax rate (as brackets stand now)

also, just checked the final tax bill so in 2019, marginal tax rate will be 24%
and marginal tax rate at FIRE will be 12%

Title: Re: Roth or traditional
Post by: MDM on December 16, 2017, 09:48:12 PM

Given what you have written, 100% traditional appears correct.

Title: Re: Roth or traditional
Post by: BlueDove on December 16, 2017, 10:15:29 PM

thank you!