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I asked something similar many, many moons ago but looking back wasn't overly helpful and my SO is currently not accessible for discussion!
My employer has just recently set up a retirement plan for everyone and I'm trying to decide if the better fit is to go with a Roth IRA or a pre-tax one based on circumstance. I make a decent salary, I'm about to be 30, and both my husband and I work and don't anticipate a change in that status anytime soon. We also feel extremely confident is seeing our salaries grow at a steady rate. The company is offering 4% matching.
I'm excellent at business math but terrible at tax math and I'm not sure if it's better to pay the the taxes upfront now with a Roth IRA, or pay them in retirement with everything taken into consideration. I also have the option to split between both but I'd rather commit to just one or the other right now unless general consensus and fact speak otherwise.
Thoughts, logic, or feelings?
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Beyond that, it will come down whether you want to pay less taxes now or later.
Is the Roth a company sponsored Roth 401k or is it a traditional Roth IRA? I don't know about the roth 401ks but the Roth IRA has a annual contribution limit of 5500, where as the traditional, pre-tax 401k's annual limit is something like 18,000 currently. So just keep that in mind.
I would in general reccomend a Roth IRA over a traditional IRA if you have access to a 401k. The maximum amount you can contribute is effectively higher, it hedges between pre and post tax, leaves open the backdoor Roth IRA option, and Roth IRAs allow more options to withdrawal.
Remember, progressive tax brackets are a thing. Even if drawing from a traditional 401k(or IRA) in retirement that is taxable income, the first $18,450 is drawn tax free, and then up to $74,900 at the 15% bracket.
However, there are some other advantages of the Roth IRA that are helpful as well. Mainly that principal contributed (not earned equity) can be withdrawn penalty free at any time. To withdraw from a traditional 401 or IRA, before the age of 59.5, you would face a 10% penalty.
so by using a Roth IRA you avoid an indeterminate tax increase in the future. there are also other marginal tax situations where its a good idea to just take the hit now, etc
also there are some (mostly people trying to sell you alternatives) who contend that 401k's are so saturated with fees that your actual gains aren't so great
the general wisdom is just do your company match because its literally free money, and independently seek whatever other prime retirement solution is right for you
we also talk about other random shit and clown upon each other
I am a big fan of mixing retirement into different areas.
The standard advice is save between 10 percent and 15 percent. Personally I would put in 4% into 401k and 2%-3% in a Roth IRA. I'm a big fan of splitting retirement account money. I never like to have all my money in one savings pool. Diversification of companies helps you in case of a total collapse of one of the fund companies.
I think I've made my decision! Thanks, everyone.
Most people who are investing outside of their company's 401k use Vanguard. Mostly for the ultra-low fees, but also because it is one of the most customer focused and reliable investment companies out there. Whenever I see this, I go back to this explanation by one of the Bogleheads guys.