Roth 401K

[dhunter]

I'm currently doing a traditional 401k, but for the first time my employer is giving us the option to do a Roth 401k.

For those that don't know...

Traditional 401K...contributions are pre-tax. Get taxed when you withdraw.

Roth 401K....contributions are taxed but no taxes when you withdraw.

Which is better and why??

[rjb1816]

roth way better imo...taxes only going to go up

[PHILLYBIRDS20]

what is the limit u can contribute? thought it was more per year with the Roth

[rjb1816]

i believe it is more with traditional

[ZoomVT]

Depends on what your tax bracket will be when you retire. If you are currently in a lower tax bracket you should do a Roth.

My personal though is that Roth is better because you don't know if in the future you get killed in taxes.

[walk066]

Delaware people are so smart.

[domafia]

roth 401k is better than traditional 401k the same way as a roth ira is better than a traditional. for most (younger) people, you will retire in a higher tax bracket than the one you are in now, so better to get taxed now and have that money tax free when you are old. you will make more in the long run.

that said i have my 401k split up 60/40 roth/traditional because i do want to sock at least some money away now tax free and not get completely reamed by uncle sam each april.

[TTB]

Roth is the way to go IMO.....my wife and I both contribute to that bad boy

[tigerman19]

both do have there advantages though. in the event something drastic happened, you can generally get your hands on your roth. traditional 401's are tougher which is good for those undisciplined.

[dhunter]

Originally Posted by rjb1816

i believe it is more with traditional

standard roth vs IRA...yes roth is less

but since this is a 401k plan, they are the same. $16,500 max per year for both.

[rjb1816]

i'm all roth...and agressive growth. levered etfs and high growth stuff...might as well i'm still a long long way off from retirement

[dhunter]

Originally Posted by ZoomVT

Depends on what your tax bracket will be when you retire. If you are currently in a lower tax bracket you should do a Roth.

My personal though is that Roth is better because you don't know if in the future you get killed in taxes.

well when i'm retired won't be tax bracket be determined by how much money i take out of the 401k per year?? hopefully our house will be paid off by then, so i won't be taking the same amount that i'm making now. so wont i be in a lower tax bracket...assuming %'s are the same

[dhunter]

Originally Posted by domafia

you will retire in a higher tax bracket than the one you are in now.

this is what i'm having trouble with. why it assumed that it will be higher in retirement. by definition, retirement means no job...thus no income. so the income will be the amount withdrawal on the account..which will be less than i'm making now, no?

[rjb1816]

Originally Posted by dhunter

this is what i'm having trouble with. why it assumed that it will be higher in retirement. by definition, retirement means no job...thus no income. so the income will be the amount withdrawal on the account..which will be less than i'm making now, no?

income taxes from both the government and state are going to go up for all tax brackets...its inevitable unfortunately

[dhunter]

Originally Posted by rjb1816

income taxes from both the government and state are going to go up for all tax brackets...its inevitable unfortunately

taxes go up and down just like the market

if taxes continually went up...it would eventually get to 100% lol