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Since Devs change jobs every few years now: 401k or Roth?

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Re: Since Devs change jobs every few years now: 401k or Roth?

#41

Post by rakmial »

HeyLaughingBoy wrote: post #33

One benefit I haven't seen mentioned is that you can often borrow against a 401k and I don't believe that's as common (impossible?) with an IRA. The benefit of borrowing against your 401k is that the interest goes back into your account. The downside is that you have a maximum of five years to repay it, and of course you're repaying it with after-tax dollars. Unlike a withdrawal, it's penalty-free.

Roth IRAs can be borrowed against for qualified expenses, like buying a home or paying for sudden, large medical expenses. There are a bunch of other, rarer cases too.

Re: Since Devs change jobs every few years now: 401k or Roth?

#42

Post by rakmial »

galdosdi wrote: post #19

Switching jobs has NOTHING to do with this. (IANAL so maybe there's strange cases I'm unaware of but...) You can always rollover to a new account, so when you quit your job, you take your savings with you and can move them into an account with any broker anywhere. Start immediately! At the very least, max out the "match" as that is free money. Look into all the details and conditions of the program. Your instincts to…

This is only half true. 401k matching typically takes time to vest, and you don't have the same amount of personal control over a 401k. Also, particularly in tech, if you move from a larger company with 401k to a small company with no benefits plan in place, you're not going to be able to roll the 401k stuff into your IRA. Obviously it won't just disappear, but you'll have just leave it in your previous employer's care.

Re: Since Devs change jobs every few years now: 401k or Roth?

#43

Post by csp256 »

rajathagasthya wrote: post #25

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…

Traditional IRA's are more appealing than they seem, even for low income earners. It is entirely possible to pay $0 tax on withdraw from a traditional IRA.

https://www.kitces.com/blog/understanding-the-mechanics-of-t...

The attractiveness of a traditional IRA only increases as your marginal tax rate does.

Re: Since Devs change jobs every few years now: 401k or Roth?

#45

Post by galdosdi »

rakmial wrote: post #42
galdosdi wrote: post #19

Switching jobs has NOTHING to do with this. (IANAL so maybe there's strange cases I'm unaware of but...) You can always rollover to a new account, so when you quit your job, you take your savings with you and can move them into an account with any broker anywhere. Start immediately! At the very least, max out the "match" as that is free money. Look into all the details and conditions of the program. Your instincts to…

This is only half true. 401k matching typically takes time to vest, and you don't have the same amount of personal control over a 401k. Also, particularly in tech, if you move from a larger company with 401k to a small company with no benefits plan in place, you're not going to be able to roll the 401k stuff into your IRA. Obviously it won't just disappear, but you'll have just leave it in your previous employer's ca…

I almost mentioned vesting, but decided to summarize as

> Look into all the details and conditions of the program.

Either way, you're not _losing_ money, even if there's a delay in getting the match.

And IANAL and don't feel like looking it up but IIRC from last time I did it, I thought it was near universal, or legally required even, to be allowed to rollover any 401k into an IRA once you are no longer employed. Do you have a source or personal details on that? This is a major point.

The important thing is nobody with access to a 401k should delay looking into it by more than a pay period, as they are likely throwing away free money every pay period that goes by and they don't even look into the details.

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