21–30 of 45 posts
https://dl.dropboxusercontent.com/u/29031758/If%20You%20Can.... Echoing other comments - at a bare minimum max out your employer match, it's free money!
Earlier quoted context omitted.
I just yesterday realized the difference between a Roth 401k and a Roth IRA... because I hadn't been contributing to my Roth 401k assuming it had the same Roth IRA income limit. But it doesn't. Oops. Would you recommend a traditional 401K or Roth 401k? I always assumed that if you weren't going to reinvest the immediate tax savings from a traditional IRA, then a Roth 401k is the way to go.
If you're a high income earner with low deductions: 401k. If you have a fairly low AGI (thus low overall tax rate): Roth. If you'll need to withdraw the principal before retirement: Roth (you can withdraw principal penalty free from a RothIRA). If your tax rate will remain the same for withdraw as it does now, it doesn't really matter since the after tax value is the same whether you take out taxes now or later (i.e.…
Assuming the money you invest goes up in value, aren't you better off in this scenario with a 401k over a Roth so that you can make gains on the money that would go toward taxes? You still have to pay taxes on the principal and the gains but compared to paying taxes on the money immediately, you're in effect borrowing money from the government at 0% to gamble with and keeping a portion of the return.
(Similarly, the expression tax_rate x (principal^gains) = (tax_rate x principal)^gains isn't true (beyond not being the right expression)).
.7 * (100000^1.07) != (.7 * 100000)^1.07 (assuming paying 30% in taxes and making 7% gains)
https://www.bogleheads.org/wiki/Main_Page
https://www.bogleheads.org/forum/index.php
It's filled with the type of thoughtful, over-analytical people that I think the readership of Hacker News would appreciate.
Earlier quoted context omitted.
If you're a high income earner with low deductions: 401k. If you have a fairly low AGI (thus low overall tax rate): Roth. If you'll need to withdraw the principal before retirement: Roth (you can withdraw principal penalty free from a RothIRA). If your tax rate will remain the same for withdraw as it does now, it doesn't really matter since the after tax value is the same whether you take out taxes now or later (i.e.…
>If your tax rate will remain the same for withdraw as it does now, it doesn't really matter since the after tax value is the same whether you take out taxes now or later (i.e., tax_rate x (principal^gains) = (tax_rate x principal)^gains. Assuming the money you invest goes up in value, aren't you better off in this scenario with a 401k over a Roth so that you can make gains on the money that would go toward taxes? Yo…
Earlier quoted context omitted.
I just yesterday realized the difference between a Roth 401k and a Roth IRA... because I hadn't been contributing to my Roth 401k assuming it had the same Roth IRA income limit. But it doesn't. Oops. Would you recommend a traditional 401K or Roth 401k? I always assumed that if you weren't going to reinvest the immediate tax savings from a traditional IRA, then a Roth 401k is the way to go.
If you're a high income earner with low deductions: 401k. If you have a fairly low AGI (thus low overall tax rate): Roth. If you'll need to withdraw the principal before retirement: Roth (you can withdraw principal penalty free from a RothIRA). If your tax rate will remain the same for withdraw as it does now, it doesn't really matter since the after tax value is the same whether you take out taxes now or later (i.e.…
When you say 'Roth', do you mean Roth 401K or Roth IRA? This is what had me confused the entire part of a year - Roth IRA vs Roth 401k.
Some great answers here. As a financial noob and only 2 years into his career, I have a question about Roth vs Traditional for software engineers. Why would you choose traditional IRA when you expect software engineer salaries to mostly go up while you advance in your career? I understand Roth IRA has limited contribution, but what is a good alternative? I see a lot of articles about this topic on the internet, but I…
I did some back-of-the-envelope calculations yesterday. As a single adult (non-dependent), if you were to max a Traditional IRA, Traditional 401(k), you could make up to around $70-75k in gross income, and still be able to qualify for the Saver's Credit. Your AGI after contributions, standard deduction, personal exemption, and deductions for things like medical insurance premiums, could reduce your total income to $37k or lower. You'd then get 10% of your contributions, up to $2000, back as a credit. At ~$37k AGI, your tax burden is approximately $5k, with the credit, it's approximately $3k (numbers crunched on excel on another computer, these are estimates from memory).
If you're married the max AGI to qualify for 2017 is $62k. Looking at my tax forms from early on in my mid career, I definitely could've swung that if I'd been married and sometimes did (but wasn't married so no credit), and at the start of my career I could have hit that $37k AGI by making additional retirement contributions, had I known about it.
Earlier quoted context omitted.
If you're a high income earner with low deductions: 401k. If you have a fairly low AGI (thus low overall tax rate): Roth. If you'll need to withdraw the principal before retirement: Roth (you can withdraw principal penalty free from a RothIRA). If your tax rate will remain the same for withdraw as it does now, it doesn't really matter since the after tax value is the same whether you take out taxes now or later (i.e.…
Not to sound stupid, but I have the option for a 401k Traditional vs 401K Roth. When you say 'Roth', do you mean Roth 401K or Roth IRA? This is what had me confused the entire part of a year - Roth IRA vs Roth 401k.
>If you'll need to withdraw the principal before retirement: Roth (you can withdraw principal penalty free from a RothIRA).
I'm not the original commenter but in regards to the advantages and situations mentioned, they apply to both Roth IRAs and Roth 401k's.
Although, check your company's plans as to when you can take early distributions. If you can't unless you retire or leave the company then "If you'll need to withdraw the principal before retirement: Roth (you can withdraw principal penalty free from a RothIRA)." might be moot. I know with my companies plan I don't believe I can even withdraw my Roth 401k contributions without quitting or retiring. With most Roth plans you are allowed to withdraw your contributions tax and penalty free, but you won't be able to "re-add" above and beyond the yearly annual contribution limits, which is why you shouldn't withdraw them.
401ks can be rolled over to IRAs. They can also (often? always?) be rolled over to another 401k when you change jobs. If you get matching, contribute at least that much to your 401k. Then max out your IRA (greater freedom in investing). Then work on maxing out your 401k. Many people point to the tax-free nature of these. Traditional 401k and Traditional IRA means you don't pay taxes now, but are taxed on the distribu…
I can think of no good reason to ever roll a 401K to another employer instead of rolling it over to a usually much lower cost IRA.