401k vs Roth 401k

Oct 7, 2021 14 Comments

Which one should we choose for someone in their early career? If both, what should the contributions towards each look like?
#401k #Roth

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  • This is how I like to look at it.

    401k is going to be a small section (15-20%; not more) of my portfolio by the time I retire. Hopefully.

    I like to split it 50-50. Withdraw from traditional for day to day expenses, and withdraw from Roth for big ticket expenses. Thatโ€™s my plan for now. Hope this helps.
    Oct 7, 2021 2
  • Google
    asdfghjkr

    Go to company page Google

    asdfghjkr
    General rule of thumb: if you are making more than you plan on making in retirement, contribute to (traditional) 401k. If you are making less, contribute to Roth 401k.
    Oct 7, 2021 2
    • Google
      asdfghjkr

      Go to company page Google

      asdfghjkr
      So yes, it depends on how much you want to be making (withdrawing from retirement accounts, social security, etc) during retirement, and it also how much you are currently making.
      Oct 7, 2021
    • Qualia
      lllllllljl

      Go to company page Qualia

      lllllllljl
      Another thing to consider: will taxes be higher in the future when we retire?

      Based on the politics of Gen z I think itโ€™s very likely
      Oct 7, 2021
  • Asana
    atMO53

    Go to company page Asana

    atMO53
    As early career, you can consider starting by contributing 100% in Roth, because your annual TC will be lower now. As your TC grows, start contributing more over to trad with the eventual goal of hitting 50-50 between Roth and trad. This way, you maximize your tax deductions and still have 50-50 in between accounts
    Oct 7, 2021 0
  • Netflix
    He$DeadJim

    Go to company page Netflix

    He$DeadJim
    I go with traditional 401k. Consider the opportunity cost. Post tax dollars donโ€™t buy as many shares. Weโ€™re taxed a lot already, so front loading more shares pretax makes sense when you have time on your side.

    In retirement, I only planning withdrawing what I actually need each year. So tax will be much less than living expenses today since my homes will be paid off and prop 13 (if itโ€™s still there) keeps my tax bill low.

    I may start shifting some to ROTH while I can, but this is my current strat.
    Oct 8, 2021 2
  • I think choosing 50% and 50% you have less chances of making a mistake ๐Ÿ˜€
    Oct 7, 2021 0