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Long Time Lurker
Old 08-09-2006, 07:29 PM   #1
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Long Time Lurker

Hey All,

Long time lurker of both this board, fool, and dripinvesting. 28 y/o male wih DW of 25 years. On the verge of changing jobs from one financial company to another with a hefty pay increase. Kind of stumped though on a decision regarding 401k(no -- I'm not cashing out will roll-over to Vanguard IRA). The new company offers a 401k-Roth, however I'm puzzled regarding the point of indifference between leveraging the Roth 401k versus traditional 401k. I believe a big portion of the equation lies in my current tax rate versus what will the future tax rate will be once I retire. Any thoughts -- would be happy to provide details. Also -- is it possible to roll a traditional 401k into a 401k roth -- assuming i'd have to pay the related taxes out of pocket. Thanks in advance.

-Gatorguy
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Re: Long Time Lurker
Old 08-09-2006, 08:20 PM   #2
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Re: Long Time Lurker

Quote:
Originally Posted by gatorguy
Long time lurker of both this board, fool, and dripinvesting. 28 y/o male wih DW of 25 years. On the verge of changing jobs from one financial company to another with a hefty pay increase. Kind of stumped though on a decision regarding 401k(no -- I'm not cashing out will roll-over to Vanguard IRA). The new company offers a 401k-Roth, however I'm puzzled regarding the point of indifference between leveraging the Roth 401k versus traditional 401k. I believe a big portion of the equation lies in my current tax rate versus what will the future tax rate will be once I retire. Any thoughts -- would be happy to provide details. Also -- is it possible to roll a traditional 401k into a 401k roth -- assuming i'd have to pay the related taxes out of pocket. Thanks in advance.
Welcome aboard.

I was not eligible for a Roth when they came out, earned too much but all is in flux now.

The one place I do wish I had a Roth is for use between early retirement (with part-time work) and full retirement, perhaps approaching age 65 or 66. Will still have a considerable tax bracket to contend with then, yet adjusting to a lower income from full time. A nicely nurtured Roth would have provided me with tax-free withdrawals during this interval to supplement my earned income.

Otherwise, I never felt they offered much over a traditional IRA for us. Guess it depends on your situation. Others will chime in.
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Re: Long Time Lurker
Old 08-09-2006, 09:20 PM   #3
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Re: Long Time Lurker

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Originally Posted by gatorguy
Hey All,
The new company offers a 401k-Roth, however I'm puzzled regarding the point of indifference between leveraging the Roth 401k versus traditional 401k. -Gatorguy
Gator, who pays the taxes on the company match in the case of the Roth 401-K?

Ha
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Re: Long Time Lurker
Old 08-09-2006, 10:21 PM   #4
Confused about dryer sheets
 
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Re: Long Time Lurker

Quote:
Originally Posted by HaHa
Gator, who pays the taxes on the company match in the case of the Roth 401-K?

Ha
The companies matches the contribution up to 3% of the salary -- they pay the taxes for the Roth 401k.

-Gatorguy
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Re: Long Time Lurker
Old 08-10-2006, 09:46 AM   #5
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Re: Long Time Lurker

Quote:
Originally Posted by gatorguy
The companies matches the contribution up to 3% of the salary -- they pay the taxes for the Roth 401k.

-Gatorguy
Seems like a good deal to me.

Ha
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Re: Long Time Lurker
Old 08-10-2006, 09:58 AM   #6
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Re: Long Time Lurker

Quote:
Originally Posted by gatorguy
The companies matches the contribution up to 3% of the salary -- they pay the taxes for the Roth 401k.

-Gatorguy
Actually, the match goes into the traditional 401k portion to be taxed upon withdrawl.

Since we aren't eligible for the Roth IRA, I have 1/3 ($5000) allocated towards the Roth 401k and the remainder to the traditional 401k. I think the Roth will give you alot of options later.
Robin
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Re: Long Time Lurker
Old 08-10-2006, 10:07 AM   #7
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Re: Long Time Lurker

You might try this calculator: http://www.smartmoney.com/retirement...ira-calculator
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Re: Long Time Lurker
Old 08-10-2006, 07:23 PM   #8
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Re: Long Time Lurker

I like the idea of paying the tax today when I have the (likely) larger income. I also like the fact that the roth doesnt have the mandatory payments. Which can put you back into a large tax rate when your retired.
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