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I see the advantages to both. I took the standard 401 route when I was younger and making a lot of money as the increased contributions over the Roth meant more money that was working for me over the years. I knew my retirement tax bracket would be lower. As my income decreased I converted to a Roth as the tax free growth was appealing.
Right, but each limits your yearly contribution to an IRA to $5,500 if you are under 50, and $6,500 if 50 or over. In a 401K you can contribute more: up to $18K if under 50 and up to $24K if 50 or over.
If your goal is to maximize how much you save for retirement, it's important to use the 401K as a tool in your arsenal, AND utilize other contributions as much as you can (Roth IRA, Regular IRA) in whatever combination makes sense for your situation.
(1) The Op has an income under about $71k and doesn't appear to be married.
(2) They contribute 5% of their income to a tax-deductible 401k so that has to be < $3,500.
(3) The goal is not to maximize how much to save for retirement, but to just put in the 5% plus the $1,200.
Therefore, the IRA limitations don't appear to be likely to get in the way of switching to an all-IRA plan.
OP here…if I misled, that was not my intent…..how do you know my income is below 71K. I never said that. It's not BTW.
IF you're going by my statement "Isn't $500 in the 401K better than say 300 in the Roth?" those were just numbers picked at random as an example of the difference of pre-tax versus after tax contributions. Those are not my actual numbers.
Quote:
You can contribute both to a Roth IRA and a pre-tax IRA.
Your MAGI needs to be < $61k per ' IRS rules ( for a single person ).
1) My isn’t that low. MAYBE I could get a partial deduction, but I'm close to the high end of the phase out.
2) If I’m going to go through all that – hardly any deduction, I might as well just increase my 401k for pretax contribution.
Maybe it’s me...I just don’t get the point of a pre-tax IRA contribution when I can use my 401K for that.
mystical, that's exactly my thought about it…..
I'm thinking just keep the unmatched pretax 401K and squeeze out more from my disposable income for the Roth.
But I just can't bring myself to drop the 401K completely, to favor the after tax Roth.
I'm SINK. Before I bought a house I had NO tax deductions….not directly relevant to retirement. But I want all the tax savings I can get.
Yep, I'm a SINK, too. I expect to get a pension at 55 or 56, though, and so, assuming the USA and/or the pension doesn't go bust in the next 10 years, that will certainly put me in a higher tax bracket. At the rate I'm going, I'll be very lucky if the Roth is worth 100K at retirement. Realistically, it will probably only be 55K-60K. So even if I wait until my early 60s to start withdrawing from the Roth, it's only going to supplement my income by 3 or 4 thousand a year. Not much now and will be even less by then. I really should try a bit harder to shovel more money in it [sigh].
^^ Oh my, me too. SINK and a pension coming. My Roth will have even less in it..not even 50K……..not unless I step it up big time. And given that I plan to retire 9 1/2 years from now at 65…..I'd better flog myself for my procrastination. I've told myself for years now to put more into it. And I will…I will.
I've started this thread to learn what others have done. But I don't stress out about it personally.
Maybe I'll do some Roth conversion before I retire…we'll see. But that may not make sense since I'll be in a lower tax bracket after I retire…..
I'll have what I have. And deal with what is when the time comes. (Pension, Roth, 401k, Soc. Sec., a paid off retirement home already, and proceeds from the home I'm in now. None of those individually are worth a lot of money, but pieced together I should be OK). I've got a plan….. and will see what shakes out…..
same boat, but i'll do the roth conversions in my 40-50s and take retirement early
but for people who work until pension age, fedsoup has details on why going roth is the better option for people with pensions, because pension+RMD+SS sucks for tax reasons
If you like a high cash cushion why not put more in the Roth IRA. Any contributions can be taken out at any time without penalty. It's essentially another savings account.
Yeah I know. Like I said we'll see. The good news is I MIGHT be able to live off my pension and not touch Soc Sec until 70 or the 401K until RMD age. I'm just gathering info and feeling people out about what they did.
So you're saying you can convert money from your 401K -- while your working and money is still going in….to your own Roth IRA.
WHAT I NEED TO PUSH AT OUR NEXT CONTRACT -- IS SEE IF THE COMPANY WILL LET US HAVE A ROTH 401K!!!
Lord willing I'll have options…good luck to you
(I'm going to be living in a state that doesn't tax retirement income, so that will help a bit, on that level at least)
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