I have been reading the forum for awhile now. I don’t post, as I typically don’t have anything to add to the great ideas presented. I do have a question and I was hoping for some help with it. I am trying to decide between traditional and Roth 401K contributions. This is the first year where I’ll be making enough to max out both my Roth IRA and my 401K. A little about my situation:
I am 30 years old. I do not have a target retirement age. I try to save as much as I can without depriving myself. I file a single return and I am in the 25% tax bracket. I do not have children or own a home. So I take the standard deduction and that’s about it. I currently contribute close to the limit (around 17K) to a traditional 401k. My company matches 6%. The company also contributes 4% to a cash balance pension plan, in which I am fully vested. I believe I should be able to take this pension money and roll it to an IRA if I leave the company before retirement age. I basically treat the cash pension as a fixed-income component of my retirement savings. I also fully fund an HSA and a Roth IRA as well.
So here’s the question: I currently have over 80% of the money I save (including company match and ‘pension’) going in to tax deferred accounts. Less than 20% of it goes in to the Roth account. I have the option of making some or all of my 401K contributions as Roth contributions as well. Should I be contributing more as Roth?
I intend to begin funding some taxable investments once I can comfortably max out the 401K. I’d at least like to be investing my tax savings from the tax deferred contributions. I will increase that as I go along. If I transition to Roth contributions I will not be able to invest as much in a taxable account.
I like the lower taxable income. It allows me to save more money comfortably. I also like the idea that I can have more control over my tax rate in retirement by using the Roth and the Traditional accounts in combination. What is the right balance of Roth vs Traditional money? What else should I be looking at when I make this decision? Any thoughts would be appreciated.
I am 30 years old. I do not have a target retirement age. I try to save as much as I can without depriving myself. I file a single return and I am in the 25% tax bracket. I do not have children or own a home. So I take the standard deduction and that’s about it. I currently contribute close to the limit (around 17K) to a traditional 401k. My company matches 6%. The company also contributes 4% to a cash balance pension plan, in which I am fully vested. I believe I should be able to take this pension money and roll it to an IRA if I leave the company before retirement age. I basically treat the cash pension as a fixed-income component of my retirement savings. I also fully fund an HSA and a Roth IRA as well.
So here’s the question: I currently have over 80% of the money I save (including company match and ‘pension’) going in to tax deferred accounts. Less than 20% of it goes in to the Roth account. I have the option of making some or all of my 401K contributions as Roth contributions as well. Should I be contributing more as Roth?
I intend to begin funding some taxable investments once I can comfortably max out the 401K. I’d at least like to be investing my tax savings from the tax deferred contributions. I will increase that as I go along. If I transition to Roth contributions I will not be able to invest as much in a taxable account.
I like the lower taxable income. It allows me to save more money comfortably. I also like the idea that I can have more control over my tax rate in retirement by using the Roth and the Traditional accounts in combination. What is the right balance of Roth vs Traditional money? What else should I be looking at when I make this decision? Any thoughts would be appreciated.