Join Early Retirement Today
Reply
 
Thread Tools Display Modes
401k roth or not?
Old 12-20-2014, 11:04 PM   #1
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 413
401k roth or not?

My employer will be offering a 401k roth, as well as continuing the standard 401k at the start of the year. I need opinions which to fund.

We (DW and I) have 705k in the standard 401k. We will be contributing 18k and 6k catchup each. Both of us work for same employer. DW will be 51 and I will be 50 in 2015.

If we fund the roth 401k, we would not be able to fund an outside roth due to exceeding income limits. Our combined income is $225k before taxes.

We will be retiring at 55 and will be recieving 36k pension (combined)/yr before taxes. My calculations show that we will have 1.1 million in 401k at 55 (5% growth projected). At 55, we planned on rolling 31k/yr into a roth to stay within the 15% tax bracket. DW would be taking SS at 62, which will be 1600/month, and I will take SS at 70, which will be 3600/month.

If we go with standard 401k, we would fund an additional 12k into an vanguard roth. If we fund the roth 401k, we would have to figure out what to do with extra savings we will accumulate.

Currently no debt, and mortgage paid off.

Whew, after all that, which would be best to fund in the 401k? the roth? or the standard 401k?
DAYDREAMER is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-20-2014, 11:25 PM   #2
Thinks s/he gets paid by the post
heeyy_joe's Avatar
 
Join Date: Nov 2012
Location: Madeira Beach Fl
Posts: 1,403
Roth 401(k). Could help DW delay SS past 62.
__________________
_______________________________________________
"A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do" --Bob Dylan.
heeyy_joe is offline   Reply With Quote
Old 12-20-2014, 11:32 PM   #3
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 413
Thanks for the reply Joe. The only reason we are considering taking DW SS at 62 is to maximize amount from SS. I have family history of dying before age 70, so, wife will benefit from me waiting till age 70, but take as much SS of hers before I kick the bucket.

We only need 36000/yr after tax to pay the bills and enjoy life.
DAYDREAMER is offline   Reply With Quote
Old 12-21-2014, 03:30 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Feb 2014
Posts: 3,046
If your plan will let you do after tax contributions to the 401k this can be rolled into a Roth IRA when you leave the company.

So you could do 18k, 6k, then 29k after tax 401k.
53k is the max of contributions and matches.

http://www.irs.gov/pub/irs-drop/n-14-54.pdf
jim584672 is offline   Reply With Quote
Old 12-21-2014, 05:38 AM   #5
Thinks s/he gets paid by the post
 
Join Date: Nov 2013
Posts: 1,027
Quote:
Originally Posted by jim584672 View Post
If your plan will let you do after tax contributions to the 401k this can be rolled into a Roth IRA when you leave the company.

So you could do 18k, 6k, then 29k after tax 401k.
53k is the max of contributions and matches.

http://www.irs.gov/pub/irs-drop/n-14-54.pdf

+1 for after tax contributions
I'd do deferred 401(k) to max your tax deferred and then do aftertax as much as you can do. You can roll that over to a Roth when you retire.
NgineER is offline   Reply With Quote
Old 12-21-2014, 10:03 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,304
Quote:
Originally Posted by DAYDREAMER View Post
Whew, after all that, which would be best to fund in the 401k? the roth? or the standard 401k?
Does that mean you cannot divide your contribution between standard and Roth?

For awhile now, I have put a bit more than required to get the full match into standard, and the rest goes into the roth.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Old 12-21-2014, 10:16 AM   #7
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 413
Quote:
Originally Posted by jazz4cash View Post
Does that mean you cannot divide your contribution between standard and Roth?
The company plan allows any division into the Roth 401k and Standard (pretax) 401k up to the limits of 18k + 6k catchup. The company match (6%) goes in pretax.
DAYDREAMER is offline   Reply With Quote
Old 12-21-2014, 10:44 AM   #8
Recycles dryer sheets
 
Join Date: Mar 2008
Posts: 413
Quote:
Originally Posted by jim584672 View Post
If your plan will let you do after tax contributions to the 401k this can be rolled into a Roth IRA when you leave the company.

So you could do 18k, 6k, then 29k after tax 401k.
53k is the max of contributions and matches.

http://www.irs.gov/pub/irs-drop/n-14-54.pdf
Never really thought about contributing up to the 53k max with the addtional 29k (minus company contribution of 6%). The company 401k allows up to 25% of your salary to be withheld. I like the investment funds 401k offers, so maybe this is a onestop shop option instead of investing into vangaurd. Thank you for giving me more food for thought.
DAYDREAMER is offline   Reply With Quote
Old 12-21-2014, 01:48 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 4,366
Quote:
Originally Posted by DAYDREAMER View Post

If we go with standard 401k, we would fund an additional 12k into an vanguard roth. If we fund the roth 401k, we would have to figure out what to do with extra savings we will accumulate.
If you can do a backdoor Roth IRA contribution (mostly that would mean you have no other tax deductible funded traditional IRA's), then the income limit for the Roth IRA is not an issue. But it would be essentially the same as after-tax contributions to your regular 401k that you later converted into a Roth IRA. But even then, you could do both.

Seems like the tax rate for contributing to the Roth 401k instead of the regular 401k would likely be high now, compared to future taxes if you are able to stay in the 15% tax bracket and live off of taxable funds and pensions while Roth converting. So a maximum deductible contribution seems to be a good choice for now.
Animorph is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Roth 401k when not eligible for Roth IRA? NinjaPigeon FIRE and Money 3 06-08-2014 02:15 PM
401K, Roth IRA, Roth 401K - Need advice please tsturbo FIRE and Money 15 05-10-2009 02:08 PM
Roth 401k vs Traditional 401k keldon FIRE and Money 3 01-08-2007 12:25 PM
Trad 401k or Roth 401k for High Earners Linney Young Dreamers 7 01-01-2007 07:24 PM
Traditional 401k or Roth 401k HatePayingTaxes Young Dreamers 4 12-30-2006 09:59 PM

» Quick Links

 
All times are GMT -6. The time now is 11:46 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.