Roth IRA vs Traditional

[Raybyrnes]

FLU
Just be careful if your company has some sort of match, that you are not over fuding early in the year. If a company has for instance a 6% match, ideally your final paychack of the year will be the one that gets you to 15500 with that matching contribution.

I work in sales so paychecks can be all over the map. I made the mistake of overfunding one year and it cost me a couple of thousand. Will never make that mistake again.

[bob2007]

Thanks for the info. I’ve got a similar situation, but unfortunately much less to pull out ;). If I just that the income tax issue alone I have to compare $10k tax for every $100k. So do I move for $20k? No, considering what it would cost to move. $100k (if I had that much)? Yes, but in between there I’m not sure.

So your tax amount of $50k is right in the middle for me. In my case I’d burn half that moving, selling the house, buying a new house, fixing new house issues, etc. The down side is leaving our friends and an area we enjoy. Your situation probably has other factors as well.

[quote=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.

[bob2007]

Thanks for the info. I’ve got a similar situation, but unfortunately much less to pull out ;). If I just that the income tax issue alone I have to compare $10k tax for every $100k. So do I move for $20k? No, considering what it would cost to move. $100k (if I had that much)? Yes, but in between there I’m not sure.

So your tax amount of $50k is right in the middle for me. In my case I’d burn half that moving, selling the house, buying a new house, fixing new house issues, etc. The down side is leaving our friends and an area we enjoy. Your situation probably has other factors as well.

[quote=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.

[bob2007]

Thanks for the info. I’ve got a similar situation, but unfortunately much less to pull out ;). If I just that the income tax issue alone I have to compare $10k tax for every $100k. So do I move for $20k? No, considering what it would cost to move. $100k (if I had that much)? Yes, but in between there I’m not sure.

So your tax amount of $50k is right in the middle for me. In my case I’d burn half that moving, selling the house, buying a new house, fixing new house issues, etc. The down side is leaving our friends and an area we enjoy. Your situation probably has other factors as well.

[quote=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.

[bob2007]

Thanks for the info. I’ve got a similar situation, but unfortunately much less to pull out ;). If I just that the income tax issue alone I have to compare $10k tax for every $100k. So do I move for $20k? No, considering what it would cost to move. $100k (if I had that much)? Yes, but in between there I’m not sure.

So your tax amount of $50k is right in the middle for me. In my case I’d burn half that moving, selling the house, buying a new house, fixing new house issues, etc. The down side is leaving our friends and an area we enjoy. Your situation probably has other factors as well.

[quote=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.

[bob2007]

Thanks for the info. I’ve got a similar situation, but unfortunately much less to pull out ;). If I just that the income tax issue alone I have to compare $10k tax for every $100k. So do I move for $20k? No, considering what it would cost to move. $100k (if I had that much)? Yes, but in between there I’m not sure.

So your tax amount of $50k is right in the middle for me. In my case I’d burn half that moving, selling the house, buying a new house, fixing new house issues, etc. The down side is leaving our friends and an area we enjoy. Your situation probably has other factors as well.

[quote=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.

[PatentGuy]

Bob2007,

I agree it is more complicated than just the tax.

Assuming California prices remain significantly higher than in other suitable states/areas, staying in CA means having too much cash tied up in a house. In HI, at least we get a premium location for the $ that we hope to enjoy for many years to come, but the premium we pay in CA (we live in Los Gatos-Saratoga area south of SF) is mostly for our kids (e.g., schools), and that premium will no longer be useful to us in retirement.

I would rather own a $500K house someplace outside of California and get to spend that extra $1M over the course of retirement, than stay in a $1.5M house in California that my kids inherit, or that gets sold to pay medical bills when one or both of us hits the end of life medical care phase.

[PatentGuy]

Bob2007,

I agree it is more complicated than just the tax.

Assuming California prices remain significantly higher than in other suitable states/areas, staying in CA means having too much cash tied up in a house. In HI, at least we get a premium location for the $ that we hope to enjoy for many years to come, but the premium we pay in CA (we live in Los Gatos-Saratoga area south of SF) is mostly for our kids (e.g., schools), and that premium will no longer be useful to us in retirement.

I would rather own a $500K house someplace outside of California and get to spend that extra $1M over the course of retirement, than stay in a $1.5M house in California that my kids inherit, or that gets sold to pay medical bills when one or both of us hits the end of life medical care phase.

[PatentGuy]

Bob2007,

I agree it is more complicated than just the tax.

Assuming California prices remain significantly higher than in other suitable states/areas, staying in CA means having too much cash tied up in a house. In HI, at least we get a premium location for the $ that we hope to enjoy for many years to come, but the premium we pay in CA (we live in Los Gatos-Saratoga area south of SF) is mostly for our kids (e.g., schools), and that premium will no longer be useful to us in retirement.

I would rather own a $500K house someplace outside of California and get to spend that extra $1M over the course of retirement, than stay in a $1.5M house in California that my kids inherit, or that gets sold to pay medical bills when one or both of us hits the end of life medical care phase.

[PatentGuy]

Bob2007,

I agree it is more complicated than just the tax.

Assuming California prices remain significantly higher than in other suitable states/areas, staying in CA means having too much cash tied up in a house. In HI, at least we get a premium location for the $ that we hope to enjoy for many years to come, but the premium we pay in CA (we live in Los Gatos-Saratoga area south of SF) is mostly for our kids (e.g., schools), and that premium will no longer be useful to us in retirement.

I would rather own a $500K house someplace outside of California and get to spend that extra $1M over the course of retirement, than stay in a $1.5M house in California that my kids inherit, or that gets sold to pay medical bills when one or both of us hits the end of life medical care phase.

[PatentGuy]

Bob2007,

I agree it is more complicated than just the tax.

Assuming California prices remain significantly higher than in other suitable states/areas, staying in CA means having too much cash tied up in a house. In HI, at least we get a premium location for the $ that we hope to enjoy for many years to come, but the premium we pay in CA (we live in Los Gatos-Saratoga area south of SF) is mostly for our kids (e.g., schools), and that premium will no longer be useful to us in retirement.

I would rather own a $500K house someplace outside of California and get to spend that extra $1M over the course of retirement, than stay in a $1.5M house in California that my kids inherit, or that gets sold to pay medical bills when one or both of us hits the end of life medical care phase.

[edna_mode]

Ya’ll are thinking about this differently than I do. My concept is diversification — not of asset classes, but of *tax treatment*. Right now, 401(k) and traditional IRAs are treated the same — tax deferred upon contribution, taxed at withdrawal. Both Roth IRAs and Roth 401(k)s are treated the opposite.

I suspect the odds are high that there will continue to be at least these two classes of tax treatment over time for retirement accounts. So no matter how each changes, I am likely to benefit from not having all of my eggs in one tax treatment basket.

So I have a 401(k) with match at work, and a Roth IRA for myself. Two different tax treatments — for someone still decades from retirement. If I were closer, than I might be able to project more accurately what the govmint might do.

So neither is “better”, only “different”. This argument is like the stocks vs. bonds thing, in my eyes.

[edna_mode]

Ya’ll are thinking about this differently than I do. My concept is diversification — not of asset classes, but of *tax treatment*. Right now, 401(k) and traditional IRAs are treated the same — tax deferred upon contribution, taxed at withdrawal. Both Roth IRAs and Roth 401(k)s are treated the opposite.

I suspect the odds are high that there will continue to be at least these two classes of tax treatment over time for retirement accounts. So no matter how each changes, I am likely to benefit from not having all of my eggs in one tax treatment basket.

So I have a 401(k) with match at work, and a Roth IRA for myself. Two different tax treatments — for someone still decades from retirement. If I were closer, than I might be able to project more accurately what the govmint might do.

So neither is “better”, only “different”. This argument is like the stocks vs. bonds thing, in my eyes.

[edna_mode]

Ya’ll are thinking about this differently than I do. My concept is diversification — not of asset classes, but of *tax treatment*. Right now, 401(k) and traditional IRAs are treated the same — tax deferred upon contribution, taxed at withdrawal. Both Roth IRAs and Roth 401(k)s are treated the opposite.

I suspect the odds are high that there will continue to be at least these two classes of tax treatment over time for retirement accounts. So no matter how each changes, I am likely to benefit from not having all of my eggs in one tax treatment basket.

So I have a 401(k) with match at work, and a Roth IRA for myself. Two different tax treatments — for someone still decades from retirement. If I were closer, than I might be able to project more accurately what the govmint might do.

So neither is “better”, only “different”. This argument is like the stocks vs. bonds thing, in my eyes.

[edna_mode]

Ya’ll are thinking about this differently than I do. My concept is diversification — not of asset classes, but of *tax treatment*. Right now, 401(k) and traditional IRAs are treated the same — tax deferred upon contribution, taxed at withdrawal. Both Roth IRAs and Roth 401(k)s are treated the opposite.

I suspect the odds are high that there will continue to be at least these two classes of tax treatment over time for retirement accounts. So no matter how each changes, I am likely to benefit from not having all of my eggs in one tax treatment basket.

So I have a 401(k) with match at work, and a Roth IRA for myself. Two different tax treatments — for someone still decades from retirement. If I were closer, than I might be able to project more accurately what the govmint might do.

So neither is “better”, only “different”. This argument is like the stocks vs. bonds thing, in my eyes.

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