Roth IRA vs Traditional

[PatentGuy]

the 4th law of thermodynamics states that government is ever-expanding, and that taxes to pay for the ever-expanding government are ever increasing.

[an]

[quote=PatentGuy]the 4th law of thermodynamics states that government is ever-expanding, and that taxes to pay for the ever-expanding government are ever increasing.[/quote]
Very funny, and I totally agree. I can see income tax being higher when I retire than where it is now.

[an]

[quote=PatentGuy]the 4th law of thermodynamics states that government is ever-expanding, and that taxes to pay for the ever-expanding government are ever increasing.[/quote]
Very funny, and I totally agree. I can see income tax being higher when I retire than where it is now.

[an]

[quote=PatentGuy]the 4th law of thermodynamics states that government is ever-expanding, and that taxes to pay for the ever-expanding government are ever increasing.[/quote]
Very funny, and I totally agree. I can see income tax being higher when I retire than where it is now.

[an]

[quote=PatentGuy]the 4th law of thermodynamics states that government is ever-expanding, and that taxes to pay for the ever-expanding government are ever increasing.[/quote]
Very funny, and I totally agree. I can see income tax being higher when I retire than where it is now.

[an]

[quote=PatentGuy]the 4th law of thermodynamics states that government is ever-expanding, and that taxes to pay for the ever-expanding government are ever increasing.[/quote]
Very funny, and I totally agree. I can see income tax being higher when I retire than where it is now.

[LesBaer45]

[quote=Raybyrnes]

LesBaer
I am missing why the amount you are going to build up or the safety of your job would make a difference on the decision to go with the Roth 401k or the Traditional 401K.

These facts may impact whether you elect to contribute or not but they shouldn’t have any impact on the which to contribute too.

What am I missing.[/quote]

Personal quirks. 🙂

I wouldn’t want YAA (Yet Another Account) to keep up with. Late last year and this year I’m doing my best to consolidate my meager non-retirement holdings into no more than three accounts*. Having them scattered about has been a loser for me personally, I’m trying to change that.

I’ve been working really hard the last few years to max out the contribution to the 401k and not hit the “limit” until the last yearly paycheck so I max the company contribution as well. I’m old and creaky now, so I get to pitch in the ‘catch up’ bonus as well so I have to adjust it carefully to pull it off yearly.

Of course two years of no raises, no bonuses makes it a bit easier but at least they were still kicking in the company contribution.

Tax wise I’m losing the house deduction since I foolishly paid it off, and one child is danger close to actually being out of the tax write off as well. I’m figuring I need all the pre-tax deductions I can get, and maybe at this stage of the game the post-tax Roth 401k isn’t making sense.

If get the boot, then I’ll be struggling just to buy beer and bologna, no company wants old broken down gray haired guys. ;-( The 401k contribution may be the least of my worries.

* “Accounts” = 1 online broker, 2 x Mutual Fund companies, not just 3 investment categories. I think part of my issues in the past have been trying to over diversify among brokers/MF managers and asset classes. There is no payback in that.

[LesBaer45]

[quote=Raybyrnes]

LesBaer
I am missing why the amount you are going to build up or the safety of your job would make a difference on the decision to go with the Roth 401k or the Traditional 401K.

These facts may impact whether you elect to contribute or not but they shouldn’t have any impact on the which to contribute too.

What am I missing.[/quote]

Personal quirks. 🙂

I wouldn’t want YAA (Yet Another Account) to keep up with. Late last year and this year I’m doing my best to consolidate my meager non-retirement holdings into no more than three accounts*. Having them scattered about has been a loser for me personally, I’m trying to change that.

I’ve been working really hard the last few years to max out the contribution to the 401k and not hit the “limit” until the last yearly paycheck so I max the company contribution as well. I’m old and creaky now, so I get to pitch in the ‘catch up’ bonus as well so I have to adjust it carefully to pull it off yearly.

Of course two years of no raises, no bonuses makes it a bit easier but at least they were still kicking in the company contribution.

Tax wise I’m losing the house deduction since I foolishly paid it off, and one child is danger close to actually being out of the tax write off as well. I’m figuring I need all the pre-tax deductions I can get, and maybe at this stage of the game the post-tax Roth 401k isn’t making sense.

If get the boot, then I’ll be struggling just to buy beer and bologna, no company wants old broken down gray haired guys. ;-( The 401k contribution may be the least of my worries.

* “Accounts” = 1 online broker, 2 x Mutual Fund companies, not just 3 investment categories. I think part of my issues in the past have been trying to over diversify among brokers/MF managers and asset classes. There is no payback in that.

[LesBaer45]

[quote=Raybyrnes]

LesBaer
I am missing why the amount you are going to build up or the safety of your job would make a difference on the decision to go with the Roth 401k or the Traditional 401K.

These facts may impact whether you elect to contribute or not but they shouldn’t have any impact on the which to contribute too.

What am I missing.[/quote]

Personal quirks. 🙂

I wouldn’t want YAA (Yet Another Account) to keep up with. Late last year and this year I’m doing my best to consolidate my meager non-retirement holdings into no more than three accounts*. Having them scattered about has been a loser for me personally, I’m trying to change that.

I’ve been working really hard the last few years to max out the contribution to the 401k and not hit the “limit” until the last yearly paycheck so I max the company contribution as well. I’m old and creaky now, so I get to pitch in the ‘catch up’ bonus as well so I have to adjust it carefully to pull it off yearly.

Of course two years of no raises, no bonuses makes it a bit easier but at least they were still kicking in the company contribution.

Tax wise I’m losing the house deduction since I foolishly paid it off, and one child is danger close to actually being out of the tax write off as well. I’m figuring I need all the pre-tax deductions I can get, and maybe at this stage of the game the post-tax Roth 401k isn’t making sense.

If get the boot, then I’ll be struggling just to buy beer and bologna, no company wants old broken down gray haired guys. ;-( The 401k contribution may be the least of my worries.

* “Accounts” = 1 online broker, 2 x Mutual Fund companies, not just 3 investment categories. I think part of my issues in the past have been trying to over diversify among brokers/MF managers and asset classes. There is no payback in that.

[LesBaer45]

[quote=Raybyrnes]

LesBaer
I am missing why the amount you are going to build up or the safety of your job would make a difference on the decision to go with the Roth 401k or the Traditional 401K.

These facts may impact whether you elect to contribute or not but they shouldn’t have any impact on the which to contribute too.

What am I missing.[/quote]

Personal quirks. 🙂

I wouldn’t want YAA (Yet Another Account) to keep up with. Late last year and this year I’m doing my best to consolidate my meager non-retirement holdings into no more than three accounts*. Having them scattered about has been a loser for me personally, I’m trying to change that.

I’ve been working really hard the last few years to max out the contribution to the 401k and not hit the “limit” until the last yearly paycheck so I max the company contribution as well. I’m old and creaky now, so I get to pitch in the ‘catch up’ bonus as well so I have to adjust it carefully to pull it off yearly.

Of course two years of no raises, no bonuses makes it a bit easier but at least they were still kicking in the company contribution.

Tax wise I’m losing the house deduction since I foolishly paid it off, and one child is danger close to actually being out of the tax write off as well. I’m figuring I need all the pre-tax deductions I can get, and maybe at this stage of the game the post-tax Roth 401k isn’t making sense.

If get the boot, then I’ll be struggling just to buy beer and bologna, no company wants old broken down gray haired guys. ;-( The 401k contribution may be the least of my worries.

* “Accounts” = 1 online broker, 2 x Mutual Fund companies, not just 3 investment categories. I think part of my issues in the past have been trying to over diversify among brokers/MF managers and asset classes. There is no payback in that.

[LesBaer45]

[quote=Raybyrnes]

LesBaer
I am missing why the amount you are going to build up or the safety of your job would make a difference on the decision to go with the Roth 401k or the Traditional 401K.

These facts may impact whether you elect to contribute or not but they shouldn’t have any impact on the which to contribute too.

What am I missing.[/quote]

Personal quirks. 🙂

I wouldn’t want YAA (Yet Another Account) to keep up with. Late last year and this year I’m doing my best to consolidate my meager non-retirement holdings into no more than three accounts*. Having them scattered about has been a loser for me personally, I’m trying to change that.

I’ve been working really hard the last few years to max out the contribution to the 401k and not hit the “limit” until the last yearly paycheck so I max the company contribution as well. I’m old and creaky now, so I get to pitch in the ‘catch up’ bonus as well so I have to adjust it carefully to pull it off yearly.

Of course two years of no raises, no bonuses makes it a bit easier but at least they were still kicking in the company contribution.

Tax wise I’m losing the house deduction since I foolishly paid it off, and one child is danger close to actually being out of the tax write off as well. I’m figuring I need all the pre-tax deductions I can get, and maybe at this stage of the game the post-tax Roth 401k isn’t making sense.

If get the boot, then I’ll be struggling just to buy beer and bologna, no company wants old broken down gray haired guys. ;-( The 401k contribution may be the least of my worries.

* “Accounts” = 1 online broker, 2 x Mutual Fund companies, not just 3 investment categories. I think part of my issues in the past have been trying to over diversify among brokers/MF managers and asset classes. There is no payback in that.

[joec]

I’ve reviewed this question many times myself in the past and have changed my view on this a while back. I used to be in the camp of 100% Roth because the goverment can only raise your taxes, but take a look at this article and some the other links in the article and you might rethink your view. I know I have. Also, a key point which is very true is job changes / layoffs, etc where you can choose at anytime when you want to do an IRA conversion to a Roth and pay low or no tax. Another good point is all the tax credits for lower income folks or middle income folks. Like the new home buyer credit, you can’t get if your income is too high.

Also, if you ever start a business, you can be looking at low taxes for a few years and do conversions every year to use up your business losses, exemptions, deductions, etc…

Unlike our parents, 30 years at the same company with a pension is very unlikely and for the overall flexibility and not being “forced” to pay taxes now, I think a regular 401k or traditional makes a lot of sense.

For people without a stable pension paying you 50 or 100k, your IRAs/401ks will probably be your only income next to social security so (check the links), you would need a pretty massive IRA before you will be in a higher tax bracket than the minimum tax rates.

http://thefinancebuff.com/2008/03/case-against-roth-401k.html

[joec]

I’ve reviewed this question many times myself in the past and have changed my view on this a while back. I used to be in the camp of 100% Roth because the goverment can only raise your taxes, but take a look at this article and some the other links in the article and you might rethink your view. I know I have. Also, a key point which is very true is job changes / layoffs, etc where you can choose at anytime when you want to do an IRA conversion to a Roth and pay low or no tax. Another good point is all the tax credits for lower income folks or middle income folks. Like the new home buyer credit, you can’t get if your income is too high.

Also, if you ever start a business, you can be looking at low taxes for a few years and do conversions every year to use up your business losses, exemptions, deductions, etc…

Unlike our parents, 30 years at the same company with a pension is very unlikely and for the overall flexibility and not being “forced” to pay taxes now, I think a regular 401k or traditional makes a lot of sense.

For people without a stable pension paying you 50 or 100k, your IRAs/401ks will probably be your only income next to social security so (check the links), you would need a pretty massive IRA before you will be in a higher tax bracket than the minimum tax rates.

http://thefinancebuff.com/2008/03/case-against-roth-401k.html

[joec]

I’ve reviewed this question many times myself in the past and have changed my view on this a while back. I used to be in the camp of 100% Roth because the goverment can only raise your taxes, but take a look at this article and some the other links in the article and you might rethink your view. I know I have. Also, a key point which is very true is job changes / layoffs, etc where you can choose at anytime when you want to do an IRA conversion to a Roth and pay low or no tax. Another good point is all the tax credits for lower income folks or middle income folks. Like the new home buyer credit, you can’t get if your income is too high.

Also, if you ever start a business, you can be looking at low taxes for a few years and do conversions every year to use up your business losses, exemptions, deductions, etc…

Unlike our parents, 30 years at the same company with a pension is very unlikely and for the overall flexibility and not being “forced” to pay taxes now, I think a regular 401k or traditional makes a lot of sense.

For people without a stable pension paying you 50 or 100k, your IRAs/401ks will probably be your only income next to social security so (check the links), you would need a pretty massive IRA before you will be in a higher tax bracket than the minimum tax rates.

http://thefinancebuff.com/2008/03/case-against-roth-401k.html

[joec]

I’ve reviewed this question many times myself in the past and have changed my view on this a while back. I used to be in the camp of 100% Roth because the goverment can only raise your taxes, but take a look at this article and some the other links in the article and you might rethink your view. I know I have. Also, a key point which is very true is job changes / layoffs, etc where you can choose at anytime when you want to do an IRA conversion to a Roth and pay low or no tax. Another good point is all the tax credits for lower income folks or middle income folks. Like the new home buyer credit, you can’t get if your income is too high.

Also, if you ever start a business, you can be looking at low taxes for a few years and do conversions every year to use up your business losses, exemptions, deductions, etc…

Unlike our parents, 30 years at the same company with a pension is very unlikely and for the overall flexibility and not being “forced” to pay taxes now, I think a regular 401k or traditional makes a lot of sense.

For people without a stable pension paying you 50 or 100k, your IRAs/401ks will probably be your only income next to social security so (check the links), you would need a pretty massive IRA before you will be in a higher tax bracket than the minimum tax rates.

http://thefinancebuff.com/2008/03/case-against-roth-401k.html

[Author]

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