401k or Roth

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I'm 25, married,

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Just 4 months ago you were asking the OT's opinion on whether to let your new g/f go to a frat party with your friend. Now all of a sudden you're married?

I was drunk one night and figured that thread would be fun. It didn't disappoint

What's the deal with it?

RMD. Know OP is 20 something, just throwing out general info for Roth/IRA/401K holders. Again, these are only proposals and likely will not end up as law, but just something to keep an eye on. Especially these provisions.

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Mandatory 5-Year Rule for Non-Spouse Beneficiaries Most IRA (and other retirement plan) non-spouse beneficiaries would be required to empty inherited retirement accounts by the end of the fifth year after the year of the IRA owner’s death (known as the 5-year-rule). The proposal does call for certain exceptions to this rule, such as for disabled beneficiaries and a child who has not yet reached the age of majority. While this proposal might simplify the required minimum distribution (RMD) rules for most beneficiaries, it would mark the death of the “stretch IRA.” Most non-spouse beneficiaries would face more severe tax consequences upon inheriting retirement accounts and as such, the value of these accounts as potential estate planning vehicles would be diminished. Establish a “Cap” on Retirement Savings Prohibiting Additional Contributions New contributions to tax-favored retirement accounts, such as IRAs and 401(k)s, would be prohibited once you’ve exceeded an established “cap.” This cap would be determined by calculating the lump-sum payment that would be required to produce a joint and 100% survivor annuity of $210,000 starting when your turn 62. At the present time, this formula produces a cap of $3.2 million. If you ended up with more than this total in cumulative retirement accounts at the end of a year, you would be prohibited from contributing new dollars to any retirement accounts in the following year. The cap would be increased for inflation.

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LINK

my company matches dollar for dollar what I put towards my 401k

im fully vested and we have tons of investment options.


very happy, would never change it

Help me understand this better... This is what a friend of mine is telling me, which sounds right:

If I'm making $85k today, wouldn't I be in a higher tax bracket today than if I were retired? Therefore, I'm paying more in taxes today by putting into a Roth than if I were to take that $450/mo and put it pre tax into my 401.

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If I'm making $85k today, wouldn't I be in a higher tax bracket today than if I were retired? Therefore, I'm paying more in taxes today by putting into a Roth than if I were to take that $450/mo and put it pre tax into my 401.

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In theory, that is possible. We also have no idea what tax rates are going to be when you retire. That is why it is nice to have tax diversification when you retire. I would contribute to the roth while you still can. 401(k) gives you tax deductions now. Roth gives you tax free, so depending on what rates are, you have two options to take advantage of whatever happens. Once you can no longer contribute to the roth, do a traditional.

The correct answer is to eat more beans and rice so you can sock away another $150/month.

ETA: I'm not joking, btw.

Tax-free growth beats everything except a company match.