401k Vs Roth IRA

[shooter]

I am a bit concerned about the raising of the tax brackets in the near future.
With that in mind, would it make more sense to stop contributing to a 401K (if there isn't any company match).
Start a Roth IRA so any gains are tax free.
I understand that the goverment can change the rules as they see fit any time. But would hope they would grandfather in any existing Roth's.
There would be less money going into the Roth because part of the contribution on the 401K is made with tax dollars.
Just thinking out loud and wondered if anyone else had ran any numbers on this.

Thanks,

 

[0b1kanobee]

I would diversify if it was me. You want to be prepared either way is my opinion. Have the best of both worlds.

 

[BNTRS]

Well, if you put the money into the your 401k you'll guarantee that when you take money out at some point in the future you'll have to pay taxes. If you use a Roth, this will never be an issue, unless you yank it out within 5 years and there is taxable growth.

You can't predict the future, but with the Roth, you can control a little more of it.

 

[DHK]

Why not a Roth 401(k)?

The main differences between the 401(k) and Roth IRA (besides taxation) is the contribution limits. You can put a lot more into a 401(k) (Roth or traditional) over an IRA.

 

[Norwayguy]

Why not a Roth 401(k)?

The main differences between the 401(k) and Roth IRA (besides taxation) is the contribution limits. You can put a lot more into a 401(k) (Roth or traditional) over an IRA.

Assuming the plan allows for Roth 401K contributions.

 

[BNTRS]

Assuming the plan allows for Roth 401K contributions.

Exactly. If that's an option then by all means, but it's still in the minority at this point.

 

[0b1kanobee]

Again, forget about the match IMO. Do both and CYA for the future. Have the best of both worlds. If there is a match on the 401k then I would 80% it and 20% your Roth.

No match, then 50/50 your contributions within the allowable limits. It's another way to diversify, I would not want to have some sort of Roth years down the road just based on where taxes might be. The way this country is headed.............
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I meant want to have Roth forget the not (darn IPhone user error).

 

[scagnt83]

I am a bit concerned about the raising of the tax brackets in the near future.
With that in mind, would it make more sense to stop contributing to a 401K (if there isn't any company match).
Start a Roth IRA so any gains are tax free.
I understand that the goverment can change the rules as they see fit any time. But would hope they would grandfather in any existing Roth's.
There would be less money going into the Roth because part of the contribution on the 401K is made with tax dollars.
Just thinking out loud and wondered if anyone else had ran any numbers on this.

Thanks,

First, how old are you? Age and situation can dictate appropriateness more than anything.
What income range are you in?
How much per year are you planning on contributing?


Having a company match is a key benefit if it is available.
If it is; max out your match! Its free money!
Even if they just give 50 cents on the dollar, that guarantees you a 50% immediate return on your money (pre market performance of course)
So you are an *** not to take advantage of it if its available.


If your companies 401k allows a ROTH option, just go for that; but as stated before, this is still something most plans have yet to adopt.


Here is the thing with a ROTH IRA/401k; you are paying taxes on the seed (contributions) and not the harvest (accumulated total at retirement).

I am going to assume that your younger, think about how much gain you plan to have in 30 years.... would you rather pay taxes now on the smaller amount? Or on the larger amount down the road.

Also, your tax rate is most likely lower now vs. were it will be in the future; so a ROTH would lessen your overall tax burden most likely.

A ROTH will also help you plan for the future more effectively since you will know what the net income will be on distributions.

But, as you stated, you will be able to contribute more to the 401k. Unless you are maxing out your account and in a high tax bracket, the difference is not huge.

But overall, without knowing more info about your situation; a ROTH will most likely be more advantageous.

 

[annuityseller]

I'd like to throw in a monkey wrench to this thread as no one mentioned using ,perm. life insurance, which doesn't have the tax problems ( if done coerrectly) and 59.5 bull, your thought. I do agree on the free company money

 

[njh_lfg]

Generally a good idea to forego the 401k if there is no match and pay the tax and contribute to either a traditional or roth. This will give you better investment options.

Max out traditional or roth then go to your 401k for further retirement savings.