Roth IRA vs Traditional

[PatentGuy]

Bob2007 asks “why not relocate now?”, especially to quit paying high state income taxes. Good question.

I’ve met more than one self-employed professional who maintains their primary residence in NV (or FL) just for income tax reasons, but still spends lots of time in Silicon Valley for work reasons.

But, for now, we are tied to CA. I have a son at SFSU (just finishing his second year), another son is a junior at the local public high school, and my wife teaches in the local elementary district.

Raybyrnes: While none of us know what the government will do, I tend to agree with Flu, and we all seem to agree the government will be desperate for $, and whether they call it a “tax” or a denial of benefits based on ones assets, the result will be the same.

My pre-tax IRA was funded entirely from rollovers of prior-employer 401K and Cash Balance Plans. I “crunched the numbers” and, assuming the respective fed and state governments do not tax the gains or otherwise financially penalize us for having the gains, it was a winner to pay the taxes now IF our combined marginal tax rate at time of distribution was over 33% – BUT depends greatly on how much you predict your gains will be prior to distribution. If you predict higher gains, make more sense to pay taxes now.

[UCGal]

flu – your friends are fortunate to have higher taxes in retirement. It means they have very good assets. Not your typical boomers – since, as a demographic, they’ve UNDER saved for retirement from everything I read.

For the post boomers I think the pension thing is a non-issue… Most private employers have eliminated or frozen pensions. My employer froze it a while back and is now underfunding it so it’s no longer available for lump sum distribution. I think most folks 50 and under won’t see any negligable money in the form of pension.

As far as the no deductions – your friends did well – had kids young and paid off their house(s). I’m a little behind the curve on the kids – so I hope to still have deductions for kids when I retire. Unfortunately, that also means still having college expenses when I’m retired.

I still think my RMDs will be less than my current salary when I retire… but if my house is paid off my spending will be less… I’m not worried about being in a higher tax bracket.

[UCGal]

flu – your friends are fortunate to have higher taxes in retirement. It means they have very good assets. Not your typical boomers – since, as a demographic, they’ve UNDER saved for retirement from everything I read.

For the post boomers I think the pension thing is a non-issue… Most private employers have eliminated or frozen pensions. My employer froze it a while back and is now underfunding it so it’s no longer available for lump sum distribution. I think most folks 50 and under won’t see any negligable money in the form of pension.

As far as the no deductions – your friends did well – had kids young and paid off their house(s). I’m a little behind the curve on the kids – so I hope to still have deductions for kids when I retire. Unfortunately, that also means still having college expenses when I’m retired.

I still think my RMDs will be less than my current salary when I retire… but if my house is paid off my spending will be less… I’m not worried about being in a higher tax bracket.

[UCGal]

flu – your friends are fortunate to have higher taxes in retirement. It means they have very good assets. Not your typical boomers – since, as a demographic, they’ve UNDER saved for retirement from everything I read.

For the post boomers I think the pension thing is a non-issue… Most private employers have eliminated or frozen pensions. My employer froze it a while back and is now underfunding it so it’s no longer available for lump sum distribution. I think most folks 50 and under won’t see any negligable money in the form of pension.

As far as the no deductions – your friends did well – had kids young and paid off their house(s). I’m a little behind the curve on the kids – so I hope to still have deductions for kids when I retire. Unfortunately, that also means still having college expenses when I’m retired.

I still think my RMDs will be less than my current salary when I retire… but if my house is paid off my spending will be less… I’m not worried about being in a higher tax bracket.

[UCGal]

flu – your friends are fortunate to have higher taxes in retirement. It means they have very good assets. Not your typical boomers – since, as a demographic, they’ve UNDER saved for retirement from everything I read.

For the post boomers I think the pension thing is a non-issue… Most private employers have eliminated or frozen pensions. My employer froze it a while back and is now underfunding it so it’s no longer available for lump sum distribution. I think most folks 50 and under won’t see any negligable money in the form of pension.

As far as the no deductions – your friends did well – had kids young and paid off their house(s). I’m a little behind the curve on the kids – so I hope to still have deductions for kids when I retire. Unfortunately, that also means still having college expenses when I’m retired.

I still think my RMDs will be less than my current salary when I retire… but if my house is paid off my spending will be less… I’m not worried about being in a higher tax bracket.

[UCGal]

flu – your friends are fortunate to have higher taxes in retirement. It means they have very good assets. Not your typical boomers – since, as a demographic, they’ve UNDER saved for retirement from everything I read.

For the post boomers I think the pension thing is a non-issue… Most private employers have eliminated or frozen pensions. My employer froze it a while back and is now underfunding it so it’s no longer available for lump sum distribution. I think most folks 50 and under won’t see any negligable money in the form of pension.

As far as the no deductions – your friends did well – had kids young and paid off their house(s). I’m a little behind the curve on the kids – so I hope to still have deductions for kids when I retire. Unfortunately, that also means still having college expenses when I’m retired.

I still think my RMDs will be less than my current salary when I retire… but if my house is paid off my spending will be less… I’m not worried about being in a higher tax bracket.

[LesBaer45]

[quote=flu]
Anyway, on my traditional employer plans, I have the option of participating in both a 401k and a Roth 401k at the same time, so I usually split the two in half up to the maximum limit (plus company has a matching plan to goes into both). I have no additional IRA accounts setup for either me individually or my side gig, for the aforementioned reason that I think I’ll end up paying a boatload of taxes post retirement than now, everything else is in post-tax investments (though some are in enjoy more favorable tax treatments than others).
[/quote]

My employer started the same option about a year or two ago. I’ve done nothing with the Roth401K option, but started to consider it this year, doing as you say “splitting” the contributions up to the limit.

At my age and layoff potential I’m not certain I could build up a big enough fund in the Roth401K to really pay off later. Maybe if I had a sure thing job for another 10-15 years I’d go that route.

My regular IRA (funded by job moves) won’t / hasn’t amounted to much. Bad investments have killed me in that one. 🙁

Me personally, I think “they” will start institute a ‘tax’ or ‘fee’ or ‘surcharge’ (<-- NC's favorite word play) on Roth IRA/401Ks. That or a reduction in other "entitlements" if you have such a plan.

[LesBaer45]

[quote=flu]
Anyway, on my traditional employer plans, I have the option of participating in both a 401k and a Roth 401k at the same time, so I usually split the two in half up to the maximum limit (plus company has a matching plan to goes into both). I have no additional IRA accounts setup for either me individually or my side gig, for the aforementioned reason that I think I’ll end up paying a boatload of taxes post retirement than now, everything else is in post-tax investments (though some are in enjoy more favorable tax treatments than others).
[/quote]

My employer started the same option about a year or two ago. I’ve done nothing with the Roth401K option, but started to consider it this year, doing as you say “splitting” the contributions up to the limit.

At my age and layoff potential I’m not certain I could build up a big enough fund in the Roth401K to really pay off later. Maybe if I had a sure thing job for another 10-15 years I’d go that route.

My regular IRA (funded by job moves) won’t / hasn’t amounted to much. Bad investments have killed me in that one. 🙁

Me personally, I think “they” will start institute a ‘tax’ or ‘fee’ or ‘surcharge’ (<-- NC's favorite word play) on Roth IRA/401Ks. That or a reduction in other "entitlements" if you have such a plan.

[LesBaer45]

[quote=flu]
Anyway, on my traditional employer plans, I have the option of participating in both a 401k and a Roth 401k at the same time, so I usually split the two in half up to the maximum limit (plus company has a matching plan to goes into both). I have no additional IRA accounts setup for either me individually or my side gig, for the aforementioned reason that I think I’ll end up paying a boatload of taxes post retirement than now, everything else is in post-tax investments (though some are in enjoy more favorable tax treatments than others).
[/quote]

My employer started the same option about a year or two ago. I’ve done nothing with the Roth401K option, but started to consider it this year, doing as you say “splitting” the contributions up to the limit.

At my age and layoff potential I’m not certain I could build up a big enough fund in the Roth401K to really pay off later. Maybe if I had a sure thing job for another 10-15 years I’d go that route.

My regular IRA (funded by job moves) won’t / hasn’t amounted to much. Bad investments have killed me in that one. 🙁

Me personally, I think “they” will start institute a ‘tax’ or ‘fee’ or ‘surcharge’ (<-- NC's favorite word play) on Roth IRA/401Ks. That or a reduction in other "entitlements" if you have such a plan.

[LesBaer45]

[quote=flu]
Anyway, on my traditional employer plans, I have the option of participating in both a 401k and a Roth 401k at the same time, so I usually split the two in half up to the maximum limit (plus company has a matching plan to goes into both). I have no additional IRA accounts setup for either me individually or my side gig, for the aforementioned reason that I think I’ll end up paying a boatload of taxes post retirement than now, everything else is in post-tax investments (though some are in enjoy more favorable tax treatments than others).
[/quote]

My employer started the same option about a year or two ago. I’ve done nothing with the Roth401K option, but started to consider it this year, doing as you say “splitting” the contributions up to the limit.

At my age and layoff potential I’m not certain I could build up a big enough fund in the Roth401K to really pay off later. Maybe if I had a sure thing job for another 10-15 years I’d go that route.

My regular IRA (funded by job moves) won’t / hasn’t amounted to much. Bad investments have killed me in that one. 🙁

Me personally, I think “they” will start institute a ‘tax’ or ‘fee’ or ‘surcharge’ (<-- NC's favorite word play) on Roth IRA/401Ks. That or a reduction in other "entitlements" if you have such a plan.

[LesBaer45]

[quote=flu]
Anyway, on my traditional employer plans, I have the option of participating in both a 401k and a Roth 401k at the same time, so I usually split the two in half up to the maximum limit (plus company has a matching plan to goes into both). I have no additional IRA accounts setup for either me individually or my side gig, for the aforementioned reason that I think I’ll end up paying a boatload of taxes post retirement than now, everything else is in post-tax investments (though some are in enjoy more favorable tax treatments than others).
[/quote]

My employer started the same option about a year or two ago. I’ve done nothing with the Roth401K option, but started to consider it this year, doing as you say “splitting” the contributions up to the limit.

At my age and layoff potential I’m not certain I could build up a big enough fund in the Roth401K to really pay off later. Maybe if I had a sure thing job for another 10-15 years I’d go that route.

My regular IRA (funded by job moves) won’t / hasn’t amounted to much. Bad investments have killed me in that one. 🙁

Me personally, I think “they” will start institute a ‘tax’ or ‘fee’ or ‘surcharge’ (<-- NC's favorite word play) on Roth IRA/401Ks. That or a reduction in other "entitlements" if you have such a plan.

[Raybyrnes]

As soon as my employer provided the Option for the Roth 401K I went all in with respect to that option. I still have some previous 401K tat I never rolled over simply because the employer offered a very good plan that had a bunch of institution mutual funds I could not get into as an individual investor.

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.

I am not criticizing but would like to get a better understanding of how these would somehow pencil into the decision making process.

To me this is the question. “How do I optimize my savings account.” The first consideration is the mix of funds. Does my plan have funds worth investing in. 2 Are they offering any type of match. 3 what are the long term tax implications. 4 Liquidity. What happens if I absolutely must get to this money 5 Estate planning. If I do not end up needing this money (not the case right now) how doe each pass to my heirs.

What am I missing.

[Raybyrnes]

As soon as my employer provided the Option for the Roth 401K I went all in with respect to that option. I still have some previous 401K tat I never rolled over simply because the employer offered a very good plan that had a bunch of institution mutual funds I could not get into as an individual investor.

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.

I am not criticizing but would like to get a better understanding of how these would somehow pencil into the decision making process.

To me this is the question. “How do I optimize my savings account.” The first consideration is the mix of funds. Does my plan have funds worth investing in. 2 Are they offering any type of match. 3 what are the long term tax implications. 4 Liquidity. What happens if I absolutely must get to this money 5 Estate planning. If I do not end up needing this money (not the case right now) how doe each pass to my heirs.

What am I missing.

[Raybyrnes]

As soon as my employer provided the Option for the Roth 401K I went all in with respect to that option. I still have some previous 401K tat I never rolled over simply because the employer offered a very good plan that had a bunch of institution mutual funds I could not get into as an individual investor.

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.

I am not criticizing but would like to get a better understanding of how these would somehow pencil into the decision making process.

To me this is the question. “How do I optimize my savings account.” The first consideration is the mix of funds. Does my plan have funds worth investing in. 2 Are they offering any type of match. 3 what are the long term tax implications. 4 Liquidity. What happens if I absolutely must get to this money 5 Estate planning. If I do not end up needing this money (not the case right now) how doe each pass to my heirs.

What am I missing.

[Raybyrnes]

As soon as my employer provided the Option for the Roth 401K I went all in with respect to that option. I still have some previous 401K tat I never rolled over simply because the employer offered a very good plan that had a bunch of institution mutual funds I could not get into as an individual investor.

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.

I am not criticizing but would like to get a better understanding of how these would somehow pencil into the decision making process.

To me this is the question. “How do I optimize my savings account.” The first consideration is the mix of funds. Does my plan have funds worth investing in. 2 Are they offering any type of match. 3 what are the long term tax implications. 4 Liquidity. What happens if I absolutely must get to this money 5 Estate planning. If I do not end up needing this money (not the case right now) how doe each pass to my heirs.

What am I missing.

[Author]

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