Switch to Roth 401k?

I converted my IRA to Roth when the market crashed in 2008. Taxes were minimized.

I am happy I did as all withdrawls are tax free and the gains have been tremendous.

Don't overthink it.

Unless you're a super saver you will almost assuredly be in a lower tax bracket. Take the deduction now, and do either direct roth or backdoor roth conversions in your IRA.

I’m probably 2.5x where you are salary so I’m taking any advantage I can right now for pretax deductions. Right now I contribute 12% to regular 401k and will bump it to 15% after my raise this year. I am also behind on where I should be balance wise at this point so that helps with maxing out 401k each year. I turn 50 this year so I can take the catch up pretax too.

I’ve been told to mix it up between Roth and regular 401k but I keep saying there is no way in hell I’ll be in the same tax bracket when I retire so take the breaks now.

Don’t think you can go wrong either way, but had a similar conversation w my advisor and he pointed out a few things I was under thinking and suggested I stick w my Roth 401k.

At some point we’ll have to address all of this money the administration is printing. What will that do to your tax rate in 30 years?

No RMDs w Roth. He’s seen some “horror stories” where RMDs caused major taxes on their SS benefits and forced people into higher tax brackets than originally planned

Roth has favorable inheritance rules if you’re also planning to build wealth for future generations

Always good to have different income streams, even if all you have are IRA & 401k investments. You’ll have the Roth you’re funding, the traditional from company match (and original investments, and some sort of SS income

NOBODY who is actively talking about and is planning for their financial future will be in a lower tax bracket 25 years from now than they are today.

ESPECIALLY if you have lots of deductions: home loan interest, kids, daycare, etc.. Take a look at your '22 taxes after they are filed: what is your REAL tax liability in (%). For most of my active-duty time in the NAVY, 3 kids at home, a mortgage, daycare, etc.. My tax liability was almost ZERO. What would have been the rational of postponing paying my taxes down the road at some unknown percentage when my REAL TAX RATE was 2%.

I personally don't plan to be poor in the future, I've been maxing out my 401K Roth and catch-up contributions plus my 4% from my employer. DCA that for the next 10-15 years on top of what I have already amassed in money, stocks, ETF's, property and I promise you my taxes are going to be more in 15 years then they are today.

Pay the taxes up front now, get them out of the way and sit back and let it grow tax free.

Your taxes will never go down, look around you, all this spending will have to be paid for by someone and something. It is going to be future tax payers.

Some good points since my post a few posts up. Now have me thinking about the Roth as well. A couple of angles mentioned that I truly didn’t think about. That’s what’s good about the money board. Lot of good banter.

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What would have been the rational of postponing paying my taxes down the road at some unknown percentage when my REAL TAX RATE was 2%.

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You should not be comparing your effective tax rate when determining if you should contribute to pre-tax retirement accounts. You should be looking at your marginal tax bracket. Even though you only paid 2% in tax, those last $1k, $5k, etc. of income could actually be taxed at 12% or 22% or whatever. Not all of your income is taxed the same. It was possible your first X of income had a negative tax rate but your last Y of income was taxed at 22%.

It is important to note that when you are withdrawing money from your pre-tax account in the future you could be filling up those low tax brackets first and supplement with roth or dividends or capital gains up to your spending needs.

I was very much looking to go away from pre-tax 401k contributions until I read about roth conversion ladders and that changed my perspective. I am a firm believer in having some tax diversification. I would recommend having a significant amount of Roth, pre-tax, and funds subject to capital gains versus income tax. Ideally no one bucket would be more than 50% of my net worth but there is no math to support that assertion.

There has been talk about what if they get rid of back door roths, what if they try to tax roths (even though they were already taxed), get rid of long term capital gains rates or increase them. No one talks about the possibility of excess taxes on 401ks. To me there are a million unknowns and we don't know what the future tax code will look like. I personally bet they will continue to try and have the "rich" subsidize the "poor" thus low tax brackets for low income which makes it worthwhile to have some pre-tax accounts to fill those low income tax brackets up.

Another item not talked about in our current tax/health care situation is that you need some income. If you have 100% in roth and retire before you are eligible for medicare you may struggle with ACA due to not having any income for subsidies. You need some income but obviously not too much income to get in the sweet spot for subsidies for ACA. I am not an expert on this but just know there are a lot of different strategies that exist and you really need to sit down and develop a comprehensive plan if you have not yet.

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Not to hijack the thread, but wouldn’t the most logical “low hanging fruit” would be to first eliminate the tax deferred aspect of the traditional, then look to eliminate the tax free growth. This would give them the money now, and some people may feel disincentivized to save this more reliant if government

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Yes, I think the most logical low hanging fruit would be to remove the ability to take a tax deduction for contributing to a 401k primarily for high income earners. It would probably be easier sell to the public and maximize the value to just set an income cap on pre-tax contributions.

It would let the government get those funds at the 32%+ tax bracket versus trying to limit people making say 75K from contributing. I think this would really only work on future contributions. Now there hasn't been much chatter around that but that provides immediate increase in tax revenue versus removing the back door roth which just potentially results in more tax revenue way out in the future (but the roth changes has already been discussed). Essentially this just reinforces that you should be probably be spreading out your funds across tradition, roth, and taxable brokerage (LTCGs). If any of these went away it would make your previous contributions even more valuable going forward with the tax benefits and added flexibility that you no longer can create.

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I converted my IRA to Roth when the market crashed in 2008. Taxes were minimized.

I am happy I did as all withdrawls are tax free and the gains have been tremendous.

Don't overthink it.

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I switched my IRA to a Roth too about 5 years into my job. Ive been here 7 years now and am trying to figure out how this works. I guess I could just go to my HR but figure theyre too boneheaded to know how it works either.

My statement from our 401k provider just has one total in my Roth. It seems from the amount it includes everything I put in and was matched from when it was an IRA. Tax wise, what is happening to my contributions/gains/matches from the first 5 years when it was an IRA? I know from my paychecks now that Im being taxed on my 401k contributions like I should being that it is a Roth now.

I have been contributing to retirement over 30 years and maxing my 401K for nearly 20 years including the catch up for the past 6 years I have been eligible.

It seemed like every time I got a raise the inflation kicker raised how much I could contribute and took most of the extra take home pay. With the house now paid off, I bit the bullet and made my maxed 401 K contributions Roth about 4 years ago. I choose to do it for a few reasons. It was an easy established account that I didn;t have to put a lot of extra work into, essentially the dollars will pack a bigger punch when coming out tax free including growth and it provides flexibility for big ticket needs that can avoid an accompanying tax hit If I want to pull out more than normal in retirement.

I am not sure I will always want to live under the current 12% cap on any given year, and currently hit the 22% number at the margins, so having a strong percentage in Roth will give me options if I want to pull out an extra 50 or 100K for some need or want.

Also the Roth kicks down the take home pay and it is a little easier not to spend money on things I don't really need out of a retirement account.

My folks just moved a few years back, and while they had assets, they were doing a lot of work to sort out financing if their home would not sell before closing on their new home. A bridge loan would still require a strong down payment from assetts they really did not want to liquidate and would have killed them in taxes. Of course Roth is not the only tool to resolve that but it demonstrated the value of having more withdrawal flexibility without being paralyzed by the tax boogie man.

I expect about a 70 tradtitional 30 percent Roth mix by the time I retire.

I am researching the transition from contributing to withdrawals as much as I can but feel pretty confident in the balances and mix of availbility this current path will provide.