[Anonymous]

I’m finally getting in on my work’s 401k. What are some opinions on whether to pick Roth vs Traditional? The employer portion goes to a traditional automatically.

[Nikki374]

@emerged, the answer to that question depends on your financial situation. My advice is to talk to a trusted financial advisor to discuss your goals and the path that can get you there!

[Anonymous]

I totally agree, I'm just looking from opinions from people in the community that I assume may have some life experience.

[Kat]

So your company is offering you a traditional 401(K) vs. Roth 401(K)? From my understanding of a Roth 401(K) vs. a regular Roth IRA, you basically get all the benefits of a regular Roth but you do not get to withdraw the money penalty free before retirement age. So, really, the only difference is whether you want before-tax or after-tax contributions. I would say go with a traditional 401(k), which is tax-free right now, but taxable when you withdraw after retirement. Because your tax rate when you retire is likely to be lower than it is right now. I would have went with the Roth 401(K) though if we had the option to withdraw from it penalty free before retirement like we do for a regular Roth but for the Roth 401(k), it's essentially the same as a regular 401(K) except for before-tax / after-tax considerations.

[2bigcpa]

In most situations, a roth 401k is the best route to go because when you retire the withdrawals are tax-free and they grow tax free. With a traditional 401k, you can deduct it from your gross income, but it is taxed when you withdraw it so if are in a higher tax bracket in the future then you will get taxed more. My job will offer both and I plan to go with the roth. A good source of financial information would be Dave Ramsey, Suze Orman, and Chris Hogan.

http://www.usatoday.com/story/money/nation-now/2017/03/06/roth-traidtional-ira-investing-taxes/97279898/

http://www.daveramsey.com/blog/roth-ira-101?int_cmpgn=no_campaign&int_dept=elp_bu&int_lctn=Article-Text_Link&int_fmt=text&int_dscpn=Link_to_Roth_IRA_in_Dave%27s_Investing_Philosophy

[Recked]

What's your current age and tax bracket?
Pre-CPA I always went ROTH, but now that my tax bracket will be higher, I am going to have to rethink which will provide me with the most benefit in the long term.
I think with the lower tax rates for the next 7 or 8 years I might stick with a ROTH, unless by some miracle I end up over the 24% bracket.

*My current employer does not offer any 401k or similar deferral plan. I am currently limited to self-funding/maxing my personal IRA.

[Anonymous]

I'm 23 and make 52k – so 25% tax bracket I believe (effectively more like 16%)..

[Recked]

No such thing as a 25% bracket anymore.
https://www.forbes.com/sites/robertberger/2017/12/17/the-new-2018-federal-income-tax-brackets-rates/#2080171a292a

22% as marginal, effective even lower for 2018 and beyond.
Go with the ROTH, you have a LONG time to let that money grow into a huge sum that you will not want to pay taxes on when you withdraw it.

When is court for your speeding ticket?

[Anonymous]

Always do Roth while it's available. The value of the tax deduction is so marginal at low income levels.

[Anonymous]

Oh I see! Alright, I appreciate the input.

Court is July 19 so I have some time to figure things out. I'm still bitter about the ticket, haha.. I drive past there twice a week now and I noticed the 35mph sign is a car length away from where I was clocked (45 in a 30) and you can see the 45mph up the big hill!

[The Imp’s Delight]

I'd recommend the Traditional 401k. You are saving your marginal rate now and have a lot of space when you withdraw in retirement before that money would be taxed at 22%. The trad 401k plus investing the tax savings beats roth IMO. Also, the amount of time for the principle to grow is irrelevant. Assuming the same tax rate, the results would be the same. This is of course assuming tax rates don't skyrocket.

[ayusdream]

Also go for traditional, you also need to considered the time value of money of the taxes you save today, and you can have more money available and save it and invest it.

[Author]

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