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401k roth or not?
Old 12-21-2014, 12:04 AM   #1
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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?
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Old 12-21-2014, 12:25 AM   #2
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Roth 401(k). Could help DW delay SS past 62.
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Old 12-21-2014, 12:32 AM   #3
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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.
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Old 12-21-2014, 04:30 AM   #4
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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
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Old 12-21-2014, 06:38 AM   #5
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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.
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Old 12-21-2014, 11:03 AM   #6
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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.
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Old 12-21-2014, 11:16 AM   #7
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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.
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Old 12-21-2014, 11:44 AM   #8
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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.
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Old 12-21-2014, 02:48 PM   #9
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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.
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