so I thought Roth, but then Im thinking that I'm def going to go up a couple of tax brackets before I retire, and then I think traditional is supposed to be better or something idk I dont know how any of this works
I should elaborate - I think that the trend for taxes is just going up so I’d rather pay while it’s still low IMO - also just paying taxes ahead of time I think sets future kits up for not worrying about the taxable rate
Roth contributions are taxed now, and as long as you leave them in for 5 years are 100% nontaxable when distributed. It means you never pay taxes on the account earnings and pay whatever your tax bracket is on what you put in.
Traditional IRA contributions are tax-deferred meaning whatever you put in the IRA is subtracted from your income, but whatever you take out in retirement is added to your income for tax purposes in the year you take it out
okay, so like, heres a question. let's say Im putting away 3%. so pre-tax it would be 3% of my income before taxes. Roth would be 3% after taxes, so wouldnt Roth be saving me less?
Call your new/current 401k servicer or IRA custodian and tell them you want to do a rollover and get their firm-specific instructions. They will either collect information and authorization to contact the old 401k servicer on your behalf, or give you instructions for how to do so
Well, in that case you'd want to take advantage of the match and keep a traditional at that company, but nah, I wouldn't think it would cause you problems
Like, maybe don't roll your existing Roth funds into the new 401k if you don't wanna deal with keeping Roth and trad balances in the same account, but that's about it
From our company's plan summary: If you elect to make Pre-Tax 401 deferrals, then your taxable income is reduced by the deferral contributions so you pay less in federal income taxes. Later, when the Plan distributes the deferrals and earnings, you will pay the taxes on those deferrals and the earnings.
Therefore, with a Pre-Tax 401 deferral, federal income taxes on the deferral contributions and on the earnings are only postponed. Eventually, you will have to pay taxes on these amounts.
Roth 401 deferrals. If you elect to make Roth 401 deferrals, the deferrals are subject to federal income taxes in the year of deferral. However, the deferrals and, in most cases, the earnings on the deferrals are not subject to federal income taxes when distributed to you. In order for the earnings to be tax free, you must meet certain conditions.
Because a Roth account isn't taxed on its earnings during a qualified distribution (if you're over 59 1/2), I think it might be the better option so long as you only plan to withdraw amounts when you retire.
Long story short, based on "I'm thinking that I'm def going to go up a couple tax brackets before I retire," I would say go for the Roth now and if your income goes up, consider swapping over to traditional
It doesn't make sense to pay taxes now if your tax rate will be higher than when you retire, and also, Roth eligibility phases out over a certain income level
(i was at telling my brother in law how i didn't expect to make what I'm making when I started looking for jobs and that i thought it would be another 10 years before i got to 100k before i saw what my low level position pays and he was like 'lol in 10 years you'll be making a quarter million' soooo)
Also retirement savings, also comes in Roth and traditional flavors, lower contribution limit annually but more flexible about when and how you can take money out, and easier to move around if you need to change custodial institution
My old 401k (now an IRA) from my old job is still bigger than my 401k at my new job, even though I'm now making twice what I did there, with a better match and contributing more
once I'm at or around 100k I'll be slamming into my 401k. I might adjust it in a few months once I see it what I'm actually left with after bills and living expenses at this new level of pay
If you elect to make Pre-Tax 401
deferral. However, the deferrals and, in most cases, the earnings on the deferrals are not subject to federal income taxes when
distributed to you. In order for the earnings to be tax free, you must meet certain conditions.