Tax question (401k vs Roth 401k vs non-retirement accounts)

[rollergrrl]

Currently my tax break is 25%, I have been maxing out my traditional 401k. If the new tax plan goes through as is I would fall to the 12% tax bracket. My question is would the Roth 401k now be the better option or would I be better off not doing a retirement investment account moving forward. I would keep what I currently have and only change future money invested to a non-retirement investment account and be taxed as capital gains in the future.

 

[VanWinkle]

Currently my tax break is 25%, I have been maxing out my traditional 401k. If the new tax plan goes through as is I would fall to the 12% tax bracket. My question is would the Roth 401k now be the better option or would I be better off not doing a retirement investment account moving forward. I would keep what I currently have and only change future money invested to a non-retirement investment account and be taxed as capital gains in the future.

Do you get a match on your 401K contributions? That would make me contribute enough to at least get the match. At 12%, I might fill a Roth next, and then go back to the 401K to max before starting a taxable account. Taxable accounts tend to be spent on things as you go, unlike a retirement account.

My 2 cents worth,

VW

 

[2017ish]

What is your likely earnings career path? If you are, say, a young big-law associate or medical resident (among other things), your future earnings and accumulation will be a big factor in this decisionmaking. Need to project what your likely rates would be when withdrawing money.... Simplifying a bit, if greater than 25% (or 12), then Roth ...

In any event, I wouldn't let any proposed changes affect me until they are enacted. Just compare the senate/house proposals--they aren't the same; very unlikely that conference committee product (assuming senate passage of a bill) is going to be identical to either.

 

[RunningBum]

I would not defer any income not being company matched at 12% or 15% once you have pulled any qualified dividends and cap gains under that level so that they are not taxed. Max out a Roth, and keep the rest in taxable and avoid spending it.

 

[rollergrrl]

Do you get a match on your 401K contributions? That would make me contribute enough to at least get the match. At 12%, I might fill a Roth next, and then go back to the 401K to max before starting a taxable account. Taxable accounts tend to be spent on things as you go, unlike a retirement account.



My 2 cents worth,



VW

No match on tax deferred account.

 

[pb4uski]

I suggest that you ressurect the question if they actually pass something.... but at 12% I would go with a Roth.

 

[jzajzz]

I think the advantage of knowing that you paid off the tax already is worth it alone going the Roth route.. Given our country 's situation .. I wouldn't count on the tax rate being better in retirement.. .and if you're anything like me.. I prepare myself to be in a better situation financially 20 -30 years from now .. and hopefully have residual income coming during retirement .. whether it's rental income, part time income, or just income from my profession (but more passive) .. Not to mention not having to worry about RMD's (at least not for your portion)... The peace of mind alone is worth it. The worst that could happen is that it forces me to save more now.

..I don't think it's ALWAYS the better idea to go the Roth route.. but when in doubt.. I rather go with the more predictable outcome

 

[jzajzz]

Do you get a match on your 401K contributions? That would make me contribute enough to at least get the match. At 12%, I might fill a Roth next, and then go back to the 401K to max before starting a taxable account. Taxable accounts tend to be spent on things as you go, unlike a retirement account.

My 2 cents worth,

VW

wouldn't she still get the Match in a Roth 401k? .. and the company match I think is pre-tax.. so that gives you some tax diversification.. though I'm not sure how withdrawals are treated in the distribution phase.