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Old 03-01-2013, 12:48 PM
bUU
 
Location: Florida
12,077 posts, read 10,647,810 times
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When making financial decisions, it often is useful to differentiate between discomfort and financial disadvantage. Knowing that you have more to work with overall, a net advantage over the alternative due to the effect of a lower tax rate, compound interest, etc., because you deferred paying tax on income earlier, should help overcome concerns about paying tax in retirement.
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Old 03-01-2013, 01:24 PM
 
15,630 posts, read 26,107,949 times
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Quote:
Originally Posted by yoyoma02 View Post
I mean, if you don’t have a company match, why would you rather invest in your 401k rather than a Roth IRA? Wouldn’t you rather pay the taxes now and have it grow tax free, rather than having to pay a higher tax rate at 65?

I don’t understand why some people max out their 401k and don’t even think about maxing out their Roth.

Please educate me, thanks!
Right now I am making over 100K a year. We are self employed and contribute to a SEP-IRA and regular IRAs. When we started our business there was no such creature as a Roth IRA. We need the tax write offs NOW, and I estimate our retirement income to be 30-40K range when we retire before Social Security.

It was explained to me that since our income would be so small it wouldn't matter much.
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Old 03-01-2013, 08:28 PM
 
Location: Cary, NC
2,407 posts, read 10,653,165 times
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Quote:
Originally Posted by yoyoma02 View Post
I mean, if you don’t have a company match, why would you rather invest in your 401k rather than a Roth IRA? Wouldn’t you rather pay the taxes now and have it grow tax free, rather than having to pay a higher tax rate at 65?

I don’t understand why some people max out their 401k and don’t even think about maxing out their Roth.

Please educate me, thanks!
Most people I know try to do both. People put more in the 401k because you're allowed to put in $17500 a year in your 401k whereas you can only put $5500 in your Roth IRA.
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Old 03-02-2013, 09:57 AM
 
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I have a 401K (no match) primarily because it's an easy way to save. I don't know that I'd save quite as much if they didn't make it as easy as taking it out for me. I do have a Roth too, which at the end of the year I put a lump sum into (my accountant tells me how much I can put in after he does my taxes). Also, the 401K lowers my income tax now, and I will probably be in a much lower tax bracket when (if) I ever retire.
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Old 03-02-2013, 10:01 AM
 
105,686 posts, read 107,645,851 times
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Quote:
Originally Posted by DanielChang View Post
Most people I know try to do both. People put more in the 401k because you're allowed to put in $17500 a year in your 401k whereas you can only put $5500 in your Roth IRA.
depending on your company compensation structure you can actually get 51k in a 401k if the employer puts it in as part of your compensation.

The IRS maximum 401K contribution is how much you can personally contribute to your 401K during the year. Your employer 401K contribution limit is entirely up to them ,but the max on total contributions employee plus employer to your 401K in 2012 is $51,000
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Old 03-02-2013, 10:48 AM
 
105,686 posts, read 107,645,851 times
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Originally Posted by bUU View Post
The part of the equation that Roth enthusiasts often leave out is this: Making a Roth contribution instead of a deductible contribution to a 401(k) or tIRA, you have to pay tax on that amount of money. If that money was invested instead of being used to pay the tax (which would be possible if it was made as a deductible contribution to a 401(k) or tIRA), then you could realize gains and earn dividends on that money, compounded for all the years between the date of the contribution and the withdrawal (when, likely, only a portion of that money will be needed to pay the tax on the withdrawal, for reasons outlined earlier).
the part they leave out is they pay the taxes from outside the money in the roth but don't figure paying the taxes from outside the 401k or deductable ira..
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Old 03-03-2013, 04:10 AM
 
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Wait until a Value Added Tax is implemented in this nation. Those overweight in Roth holdings will really get bent over on that one.
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Old 03-03-2013, 04:22 AM
 
105,686 posts, read 107,645,851 times
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you can wait and wait for any number of things to happen that never will. so far in 146 years of financial history it is the chicken littles and the waiters that paid the price of being alot poorer for their visions.
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Old 03-03-2013, 04:50 AM
 
1,637 posts, read 1,872,719 times
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Originally Posted by mathjak107 View Post
you can wait and wait for any number of things to happen that never will. so far in 146 years of financial history it is the chicken littles and the waiters that paid the price of being alot poorer for their visions.


Notice I said those that were 'overweight' in roth holdings. I think traditional 401k in conjunction with Roth IRA is prudent, and provides tax diversity for the future of unknowns. When dealing with the government , a bird in the hand is better than two in the bush, that's why I could never see utilizing both a Roth 401k and Roth IRA at the same time.
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Old 03-03-2013, 04:59 AM
 
105,686 posts, read 107,645,851 times
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my opinion is a vat tax is something we may never have. that would tax the poor to heavily . they may be taxed on 100% of their income while mr ceo pays taxes on a smidgeon of his since he may spend only a small part.

there are a few things congress takes advantage of themselves like the life insurance exclusion from taxes , roths, and tradional ira's. you can bet those will be safe or grand fathered from any changes.

Last edited by mathjak107; 03-03-2013 at 05:10 AM..
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