Posted by
Message
Clint Torres
New Orleans Pelicans Fan
Member since Oct 2011
1773 posts

Interested in any thoughts as to whether or not a Roth IRA is right for us?
Wife and I are both 40 and we each have 401ks through our employers; we each contribute beyond the employer match but not to the max per year. Unfortunately, we got a bit of late start on saving for retirement and thus far we both have very low 6 figures in each account.

I've read a good bit here recently and it seems like conventional wisdom is to contribute to 401k up to the employer match and then contribute to Roth up to the max and then go back to 401k up to the max.

We have decent combined income and would need to go the back door Roth route, but I'm wondering if that's the right move at this point.

Would we be better off reducing taxable income now by contributing more to our 401ks? Have we gotten too late of a start to bother with the Roth? What would you do? Max out 401k first? Other?


LSURussian
LSU Fan
9 acres of paradise in Baton Rouge
Member since Feb 2005
118593 posts
 Online 

re: Interested in any thoughts as to whether or not a Roth IRA is right for us?
quote:

Have we gotten too late of a start to bother with the Roth?
If you're maxing your 401(k) regarding the company match, then a Roth is what I would do on my own.

The idea of never paying income taxes on 20 or 25 years of gains would make me giddy.

The biggest risk, as I see it, is the federal government will realize at some point how much future income taxes will be reduced based on so many taxpayers living tax free off their Roth withdrawals that they will slap some type of wealth-related Roth tax on some of us.


Clint Torres
New Orleans Pelicans Fan
Member since Oct 2011
1773 posts

re: Interested in any thoughts as to whether or not a Roth IRA is right for us?
Appreciate the response. You still think Roth is the right move even though we are likely to be in a considerably lower tax bracket in retirement?


Replies (0)
Replies (0)
10
Croacka
Chicago Cubs Fan
Denham Springs
Member since Dec 2008
61139 posts

re: Interested in any thoughts as to whether or not a Roth IRA is right for us?
my employer allows us to do traditional 401k and roth 401k

so without using my separate IRA, i can still contribute pre and post tax dollars

many employers have similar offerings i would think


Replies (0)
Replies (0)
10
BamaAlum02
Alabama Fan
Huntsville, AL
Member since Nov 2005
568 posts

re: Interested in any thoughts as to whether or not a Roth IRA is right for us?
My answer is the same to all the other Roth vs traditional questions...have a good mix so you have options.

I max traditional 401k and do a backdoor Roth every year. I am about to start moving some of my 401k contributions from traditional to Roth. I am in a high tax bracket so most would say it doesn't make sense. My response is I want options for withdrawals and I don't plan to be poor in retirement so I'm not sure my rate will be that much lower.


Replies (0)
Replies (0)
40
TorchtheFlyingTiger
North Carolina St. Fan
FL
Member since Jan 2008
683 posts

re: Interested in any thoughts as to whether or not a Roth IRA is right for us?
So your AGI is over $196,000 and you only have low six figures saved at 40. You make over $196k plus $24,800 standard deduction and current 401k contributions. I'd aim to max both 401ks. Maybe that gets your AGI down for ROTH or do a backdoor. You're going to need a huge retirement fund to maintain your current standard of living. Get your spending down, max both 401ks and max both Roths. Otherwise, hope you both plan to work until late 60s. Either way put some in Roth for future tax diversification and because tax rates are likely to go up.


TD SponsorTD Fan
USA
Member since 2001
Thank you for supporting our sponsors
Advertisement
notsince98
Missouri Fan
KC, MO
Member since Oct 2012
11506 posts

re: Interested in any thoughts as to whether or not a Roth IRA is right for us?
Good answers require you to answer some questions first.

Will your retirement income level be higher or lower than your current income?

Do you need to access retirement money before you hit the IRS eligible age?


Clint Torres
New Orleans Pelicans Fan
Member since Oct 2011
1773 posts

re: Interested in any thoughts as to whether or not a Roth IRA is right for us?
quote:

Will your retirement income level be higher or lower than your current income?


Considering the current values of our 401ks, retirement income stands to be substantially less. I'm trying to work on that though

quote:

Do you need to access retirement money before you hit the IRS eligible age?


I certainly hope not. The plan is no.
This post was edited on 1/10 at 2:00 pm


Clint Torres
New Orleans Pelicans Fan
Member since Oct 2011
1773 posts

re: Interested in any thoughts as to whether or not a Roth IRA is right for us?
quote:

TorchtheFlyingTiger


Thanks for the input.


Replies (0)
Replies (0)
00
BamaAlum02
Alabama Fan
Huntsville, AL
Member since Nov 2005
568 posts

re: Interested in any thoughts as to whether or not a Roth IRA is right for us?
quote:

So your AGI is over $196,000 and you only have low six figures saved at 40. You make over $196k plus $24,800 standard deduction and current 401k contributions. I'd aim to max both 401ks. Maybe that gets your AGI down for ROTH or do a backdoor. You're going to need a huge retirement fund to maintain your current standard of living. Get your spending down, max both 401ks and max both Roths. Otherwise, hope you both plan to work until late 60s. Either way put some in Roth for future tax diversification and because tax rates are likely to go up.


His income could have sharply increased causing him to appear to be behind on savings. That happened to me in my mid-30's. I basically doubled my income over the course of about 2 years. I track different ratios and measurements for retirement and net worth goals and I remember thinking how far behind I was because my savings balances didn't match my income level. I was able to get caught up after a few years from savings and favorable market returns and he may also.


Replies (0)
Replies (0)
10
notsince98
Missouri Fan
KC, MO
Member since Oct 2012
11506 posts

re: Interested in any thoughts as to whether or not a Roth IRA is right for us?
quote:

Considering the current values of our 401ks, retirement income stands to be substantially less. I'm trying to work on that though


Traditional would probably be the better choice.

quote:

I certainly hope not. The plan is no.


A lot of people want to retire early. If you want to retire early you can withdraw your Roth contributions penalty free before the IRS retirement age.

If you don't need that option, it appears you would save a lot in taxes by maxing out all your pre tax options before considering a Roth.


Replies (0)
Replies (0)
10
tirebiter
LSU Fan
ATL
Member since Oct 2006
6518 posts

re: Interested in any thoughts as to whether or not a Roth IRA is right for us?
If you are able to contribute to an HSA I would contribute to it before a Roth. Would do 401k to match, then HSA, then fill 401k to reduce current taxes, then backdoor a TIRA to a Roth if you can. I find a mix of investment types, ie taxable, tax deferred, HSA and Roth to be beneficial, especially if someone later chooses to retire early. No way I would want 75% or more of my investment assets in tax deferred 15 years up the road, especially with future tax rates unknown. You can use something like dinkytown.net 1040 to estimate your 2020 tax return extrapolating from 2019 to get to MAGI limits, ect. HSA at 65 YO could become very valuable as tax free for most, if not all, withdrawals at that point not just medical, but need a high deductible insurance plan to contribute. I am early retired and about 50% taxable investments, 30% TIRA, and 20% Roth/HSA. If you are looking at 30%+ Fed + state tax it is hard not to fill up the traditional 401k for current tax savings.


Replies (0)
Replies (0)
10
first pageprev pagePage 1 of 1next pagelast page
refresh

Back to top

logoFollow TigerDroppings for LSU Football News
Follow us on Twitter, Facebook and Instagram to get the latest updates on LSU Football and Recruiting.

FacebookTwitterInstagram