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401k Roth question
Posted on 7/14/15 at 11:47 am
Posted on 7/14/15 at 11:47 am
Can someone explain how these products work? Really just the difference between a 401k and 401k roth.
My wife can have 1 or both. Should she have 1 or both?
Thanks., I see the thread above but really didnt see an explanation on the 401k roth.
Ive searched online but my feeble mind needs more substance.
My wife can have 1 or both. Should she have 1 or both?
Thanks., I see the thread above but really didnt see an explanation on the 401k roth.
Ive searched online but my feeble mind needs more substance.
This post was edited on 7/14/15 at 11:48 am
Posted on 7/14/15 at 11:51 am to ragacamps
Roth 401k you put in after-tax dollars and you are able to take the money out at ~60 without paying taxes on gains
401k you put in before tax dollars and you are taxed when you take the money out.
401k you put in before tax dollars and you are taxed when you take the money out.
Posted on 7/14/15 at 11:52 am to ragacamps
I many not be right but a 401k you defer taxes until you take the money out. Withthe roth option, you are betting taxes will be higher when you take it out so you pay taxes on that income now.
Edit, yellowhammer beat me to it
Edit, yellowhammer beat me to it
This post was edited on 7/14/15 at 11:54 am
Posted on 7/14/15 at 12:39 pm to achenator
I understand that much. But how does an employee 401k roth function as opposed to a 401k or a regular roth ira?
Posted on 7/14/15 at 12:40 pm to ragacamps
My understanding is the correct reason to use a Roth is when you expect your post retirement income to put you in a higher tax bracket than pre-retirement income would.
In reality, having both a Roth and non-Roth would let you balance your tax liability in retirement.
In reality, having both a Roth and non-Roth would let you balance your tax liability in retirement.
Posted on 7/14/15 at 1:08 pm to Dirtman16
quote:
In reality, having both a Roth and non-Roth would let you balance your tax liability in retirement.
I did this and split 50/50. I can't predict the future and figured walking the line would be my best bet.
Posted on 7/14/15 at 2:04 pm to StinkBait72
another recommendation is that when you are early in your career you will be making less $. Since you make less, you are paying less taxes and putting more in the Roth makes sense. As you get older and salary increases, you start moving deposits more to the traditional 401k/IRA and less to the Roth.
Posted on 7/14/15 at 2:22 pm to notsince98
Any match that the company offers has to go to a traditional 401k correct? Only your contribution will go into the roth side.
Please correct me if I'm wrong.
Please correct me if I'm wrong.
Posted on 7/14/15 at 4:32 pm to Jblac15
No, not necessarily. It depends on the company's policy, first and foremost. Her HR dept. should be able to answer that question.
As for what she should or shouldn't do, without knowing her age, income, current investment/retirement profile and a host of other variables, it's hard for anyone to give you a meaningful answer.
We were supposed to get a Roth 401k option where I work for next year. For whatever reason, that option was taken off the table a few weeks ago. I'm still quite unhappy about that. I have more than enough tax deferred retirement funds. I wanted to balance things out with a Roth 401k, to go along with my Roth IRA.
As for what she should or shouldn't do, without knowing her age, income, current investment/retirement profile and a host of other variables, it's hard for anyone to give you a meaningful answer.
We were supposed to get a Roth 401k option where I work for next year. For whatever reason, that option was taken off the table a few weeks ago. I'm still quite unhappy about that. I have more than enough tax deferred retirement funds. I wanted to balance things out with a Roth 401k, to go along with my Roth IRA.
Posted on 7/14/15 at 6:40 pm to ragacamps
With a traditional IRA or 401(k), you can deduct the money you put in from your income before you pay taxes. However, you pay tax on what you withdraw after you retire.
With a Roth IRA or 401(k), you cannot deduct your contributions from income. However, what you withdraw after retirement is completely tax-free.
An added benefit of the Roth IRA (I don't know if this applies to the Roth 401) is that you can withdraw funds from the Roth IRA up to the amount you've contributed with no penalties whatsoever. The IRS doesn't care b/c you already paid your taxes. This removes the need to set aside money for an emergency fund in a taxable savings account - just plow it all into a Roth IRA.
Another little feature is that because the returns on a Roth account are not taxed, you should make your more risky investments there. If your retirement planning is such that you should have some emerging market stocks, for example, it's probably better to do it in your Roth than in a traditional plan.
With a Roth IRA or 401(k), you cannot deduct your contributions from income. However, what you withdraw after retirement is completely tax-free.
An added benefit of the Roth IRA (I don't know if this applies to the Roth 401) is that you can withdraw funds from the Roth IRA up to the amount you've contributed with no penalties whatsoever. The IRS doesn't care b/c you already paid your taxes. This removes the need to set aside money for an emergency fund in a taxable savings account - just plow it all into a Roth IRA.
Another little feature is that because the returns on a Roth account are not taxed, you should make your more risky investments there. If your retirement planning is such that you should have some emerging market stocks, for example, it's probably better to do it in your Roth than in a traditional plan.
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