Roth 401k vs Traditional 401k

May 3, 2020 9 Comments

I’ve been going back and forth a lot trying to figure out whether I should contribute to my Roth 401k, Traditional 401k or both. Im curous to see what other people do. Feel free to leave your opinions in the comments section.

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  • Microsoft
    FKxB62

    Go to company page Microsoft

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    #1 in Prestige
     FKxB62
    Roth bets that your marginal tax rate right now is lower than your marginal tax rate when you retire.

    This can happen because:
    - taxes are raised in future
    - you move to a state with a higher income tax when you retire
    - your income that you draw on when you retire is higher than your current income (ie you’re early in your career and expect a large raise later in your career)

    It’s not possible to know the future, but the best option is to choose both to hedge your bets.

    The optimal ratio of how much you put in one vs the other depends on your best guesses of the above factors.
    May 3, 2020 1
    • OP
      Thanks for the advice! I was doing a traditional for most of my career up until 3 years ago cause that is the only thing they offered. The last 3 years I have been doing a Roth, so I’ve been hedging my bets to some extent. Probably going to go Traditional since I’m in a high income bracket. I already live in a high income tax state as well.
      May 3, 2020
  • New
    mnWY86

    New

    mnWY86
    Max out traditional 401k and Roth IRA
    May 3, 2020 1
  • This should be dependent on where you are in your life and financial status. Early in your career when your income may be lower, Roth makes sense. As you move towards higher incomes later in your career, you should begin to transition towards traditional.
    May 3, 2020 1
    • OP
      I’m pretty much entering the middle of my career. I’ve been doing a Roth, but have I have been leaning towards going traditional as of late. This and the previous comment pretty much confirms what I was thinking. Thanks!
      May 3, 2020
  • The way things are going who knows if Roth's tax situation will actually be honored by the time we retire. Besides, if you're in a high income bracket now then you should be doing pretax
    May 3, 2020 1
    • OP
      Makes sense. Initially, I was just going the Roth route cause taxes may raise in the future. Didn’t really take my current income into consideration though. Thanks!
      May 3, 2020
  • Oracle / Eng
    vsxU15

    Go to company page Oracle Eng

     vsxU15
    I am in the similar situation. At the start of my career and I am doing 18% Roth. Just curious to know what will happen if i am retiring in a foreign country(say India)? Will I have to pay taxes if I was doing traditional IRA?
    May 8, 2020 0