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I max out my 401K but I have never done an IRA. I am a bot, and this action was performed automatically. As for the company match, they will always match pre-tax. IRA vs. 401K questions. Unless you plan on starting your own business, you’ll need to work within the options your employer has provided. I know there are IRS contribution limits for both ($18k traditional and $5.5k Roth?) From that point you no longer have any time pressure, and can choose to rollover that money into your new 401k at a later time. Rolling Over Company Stock: A Decision to Think Twice About . Fidelity IRA vs Vanguard IRA in 2021 Fidelity Investments vs Vanguard for IRA accounts, Roth IRA, Rollover, SEP, SIMPLE. 401K… 4% to Roth, 2% after-tax, 2% before-tax), would my employer split up the match the same way? Edit: Oh and I max out my HSA but use half of it every year, so there will be maybe 30K in it by the time I retire. Employer vs. individual accounts: Most 401(k)s are offered through employers, while anyone can open an IRA with any brokerage so people don't … My wife has a 5K rollover IRA. This community is awesome, I often curse myself for the blissful ignorance for the last 10 years. Yep, they match up to 5%, so she is currently doing 6%. ROTH: Is Taxed, then contributed to the plan. An IRA is an Individual retirement plan (meaning you set it up and contribute to it on your own as long as you have income) the max is 5500 so together you can contribute up to 23.5k as long as you stay below the income limit for the IRA. but I'm not entirely clear on those either. Thanks in advance to anybody who can help out :). Save some money for health insurance, things will probably change but 7 years in the open market ( retiring at 58 )is going to be brutal. The recession almost cut that $1,000 in half at its lowest and is now hovering around $750. From the plan, 20% will be automatically deducted for federal, unless doing an MRD at 70.5. I don't know what tax rates will be when I am old so I diversify my tax risk similar to diversifying market risk by buying an index fund. i definitely agree that traditional ira and 401k is a better choice than a roth ira or roth 401k, if it’s an either or situation. 401K. I will take it at 62. I did not wisen up until I was a fellow and then it was for a 401K and not maxed out even….then as you get more wealthy and need the tax write offs, traditional it is (except for the back door roth IRA). How 401(k) Withdrawals Work When You're Unemployed. It’s a late start, better late than never I guess. 1.6M in investments and the rest in my HCOL house. Whether you choose a traditional IRA, a Roth IRA or both, your retirement will be richer for it. A Traditional IRA (Individual Retirement Account) allows individuals to direct pretax income toward investments that can grow tax-deferred. If I split up the initial 8% contribution from my paycheck (e.g. I have only have car debt and mortgage debt. Traditional IRA vs. Roth IRA: Which Do I Choose? I have a few questions, and hoping that this post doesn't get too long. Effective limit is higher compared to traditional IRA as the contributions are post-tax. Upon withdrawal at 59.5, you pay no taxes on the amount you contributed, but you have to pay taxes on the gains. Hi guys am 34 years old, just started investing. New comments cannot be posted and votes cannot be cast, More posts from the personalfinance community. Please contact the moderators of this subreddit if you have any questions or concerns. Hi PF, So I've tried my damnedest to read through the Wikis and I'm still ridiculously confused about retirement funds and hoping to get some help (almost 26, have about $9k in a 401k already, but still have no idea what any of it means and temporarily stopped my contributions to pay down some debt). Matching Contributions Matching contributions available from some employers. An IRA is by definition not through your employer. I currently allocate 5% of my annual salary (about 5 K) to 401K as my employer matches it. And try to get the house paid off. Having no debt will give you a lot of flexibility after retirement, and even before in your investing decisions. I've never seen a company contribute ROTH for match. Roth vs Traditional 401(k) In a traditional 401(k), employees make pre-tax contributions. Disadvantages. Join our community, read the PF Wiki, and get on top of your finances! However, she only does 6% on her 403B. My employer suggested I go with a Roth 401k over a traditional 401k because I’m younger and the taxes would affect me less when it comes time to retire. Press question mark to learn the rest of the keyboard shortcuts, /r/personalfinance/wiki/index#wiki_retirement_accounts. Like if I contributed $10k to a traditional 401k I could only contribute $8k to a traditional IRA? A couple of things. A "rollover IRA" is just a special category of Traditional that indicates all the money came from a 401k. I max out my 401K but I have never done an IRA. It is taxed upon withdrawal from the plan (unless rolled over) typically at 20% for federal, and whatever your state is if mandatory. My employer offers a 75% match for the first 8% of my 401k contribution. ⁣ An IRA is an Individual Retirement Account. I guess it seems people are saying to do IRA over 401K. 401K. They've offered you a Roth 401k. New comments cannot be posted and votes cannot be cast, Press J to jump to the feed. $18k for 401k, $5,500 for IRA. And that Roth vs traditional really just depends more on your expected tax situation in retirement vs in your accumulation phase. It's good stuff. You can't access the money until age 59 1/2. That's $6,000 each, it will add up over the next 12 years. If deductible, contributions lower taxable income in the year they are made. Contribution limit does not apply to conversions from traditional IRA (or qualified employer plans) to Roth IRA. The difference is just the tax status of the contributions. A 401k is a employer sponsored retirement plan where you can contribute up to 18k a year that does not include matching contributions and has nothing to do with a IRA except that both are retirement plans. ROTH: $80k in contributions (already taxed), $20k in gains. Between my wife and I we should get 35-36K/year in SS. Overview of Vanguard vs Fidelity For IRA Investors who want good value in brokerage services often turn to Fidelity or Vanguard. This will make the transaction non-taxable, and you'll get back the withheld money as an increased refund when you file your taxes. Compare broker retirement account fees, commissions, and offerings. But it boils down to: Do I want to save money on taxes now, or do I want tax-free money when I retire? You pay taxes on $100k, upon WD. After tax: $80k in contributions (already taxed), $20k in gains. Even if you participate in a 401(k) plan at work, you can still contribute to a Roth IRA and/or traditional IRA, as long as you meet the IRA's eligibility requirements. Press question mark to learn the rest of the keyboard shortcuts. IRA. level 1 12 months ago. It's considered income, so you may owe more in taxes if you had other income that year. I ended up splitting the difference with half Roth, half tax-deferred contributions in my 401K. mpi vs roth ira reddit, So I started a Roth IRA when I was 18 or so and never put any more money into it after my initial $1,000 investment (I know, I should have). Feel free to message me if you have questions. I (think I) understand that before-tax comes out before tax does (lowering my AGI) but will be taxed upon withdrawal (though not positive on what the tax rate is based on), after-tax comes out after my current taxes but WON'T be taxed when I take it out, and Roth is some sort of magical being that I can't wrap my head around no matter what I read but seems to be a universal favorite. Very confused. All that said - the MAIN benefits of a Roth 401k and a Roth IRA are the same - tax free growth and tax free withdrawals in retirement. What's the difference between a 401k and an IRA? While this reduces your taxable income now, you'll pay regular income tax … There are 3 options for contribution: before-tax, after-tax, and Roth 401k. 401K vs ROTH IRA. I think I have more questions but this is all I can think of for now. The reason why I have traditional is to bring down my agi to lower taxes paid to get my Roth contributions in. Now, if you’re self-employed and have employees and you’re curious as to whether to go with the SEP IRA over the SIMPLE IRA or traditional 401k, I would still say, mostly, no. I am 48M and married and looking to retire as soon as possible, but will likely have to work to 58 to meet my goals. Finally, the questions...should we max out her 401K first or should we be doing trad IRA and convert to Roth IRA? You are eligible to contribute to either a traditional 401k or a Roth 401k based on what your employer has made available. Have a good, sharp accountant/ life guy look into an annuity, may be a unique way to grow some money tax deferred, that is if all other options are ruled out Good luck, I hope your plan works out ! Does your wife's company match her 401K contributions? Traditional. I probably can't do both. Unless you're 70.5, and doing an MRD, in which case it goes off whatever your tax tables recommend. Report Save. Yay free money! Go ahead and max the regular IRA. 403(b) vs. Roth IRA: An Overview . Get the car debt paid off. I'm guessing your income levels mean you can't put money into a Roth IRA. Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. but is that grand total? Limits: The 401k and an IRA don't use the same limits, so knock yourself out if you want to do both. Retirement. I’m in the same income bracket as you and I do a 401K traditional and then a Roth IRA. I am 48M and married and looking to retire as soon as possible, but will likely have to work to 58 to meet my goals. So I've tried my damnedest to read through the Wikis and I'm still ridiculously confused about retirement funds and hoping to get some help (almost 26, have about $9k in a 401k already, but still have no idea what any of it means and temporarily stopped my contributions to pay down some debt). There is a wealth of information out there about Roth vs traditional. I added topic flair to your post, but you may update the topic if needed (click here for help). Money types: Pre-tax: This money type is, as you mentioned, deducted before taxes. It is a frequently mis-understood concept 401K. If yes, I suggest contributing up to what the company matches and throwing the rest into a Roth or Traditional IRA. 401K. My net worth is 1.165M with a goal of 2.2M by 58. So here come the questions. That makes sense and is pretty much what my line of thinking was as far as the tax goes after retirement. 2. share. Contribution notes Effective limit is higher compared to traditional 401k as the contributions are post-tax. I suggest you do more research then post a more specific question of there is something you don't get. Once you hit 59.5, and not moving it for 5 years, you take out the entire amount with no more taxes due. The taxes you will pay will be based on how much you withdraw from your traditional accounts so if you withdraw 50k that will be your income and you will pay taxes accordingly. 401K. If your 401k has terrible options, when you switch jobs down the line you can either roll it into your new 401k (if it has good options) or roll it into a Traditional IRA, without paying any penalty. Both 403(b) plans and Roth IRAs are vehicles designated for use in retirement planning. Press J to jump to the feed. Traditional, you defer the taxes to your retirement and the thinking is that in retirement you will not have a job so zero income. Continue to invest enough into your 401k to get the match, and open up an IRA (Vanguard is recommended often in this sub) with the remaining funds. You pay taxes on the $20k upon WD. Traditional IRA; Roth 401(k) Traditional 401(k) I think the terms can confuse people so let’s break it down. Pre-tax: $100k in contributions and gains. 1.6M in investments and the rest in my HCOL house. By using our Services or clicking I agree, you agree to our use of cookies. You pay no more in taxes after meeting the Roth guidelines. So theoretically, could I contribute $18k to the Roth 401k plan and $5500 into a Roth IRA so that I could have $23.5k/year not subject to tax upon withdrawal? Dive into the details of a traditional 401k vs Roth 401k below: Eligibility. I need help understanding which is better ROTH or 401k. I have only have car debt and mortgage debt. The IRS assess no capital gains or dividend income taxes until the beneficiary makes a withdrawal. After tax: Taxed, then contributed to the plan. Both IRAs have a contribution limit of $6,000 in 2020. I also know I've read a lot about personal IRAs (for those without 401k plans?) Also, we live in a time where tax rates are low. When is comes to the battle of retirement plans, SEP IRA vs Solo 401k, the Solo 401k is the clear winner (if you are self-employed and you or your spouse are the only employees). The 401k versus IRA debate is an opportunity to think about retirement savings, particularly regarding using a tax-advantaged account. 10 Things You May Not Know About Your IRA. Must-Know Rules for Converting Your 401(k) to a Roth IRA . And then my employer would put the 6% match (75% of 8%) into the pre-tax bucket? My net worth is 1.165M with a goal of 2.2M by 58. Large investment selection. Top Reasons Not to Roll Over Your 401(k) to an IRA. What's the best option to do this split? Retirement. Total debt between the two is 255K. Tax implications? Start here: /r/personalfinance/wiki/index#wiki_retirement_accounts. In my 401K I can actually divide up between Roth vs traditional contributions, so this question was an even bigger deal for me. Roth as you said you pay the taxes now and won't have to worry about it in retirement since with withdrawals will be tax free. That would be almost $50,000/year saving for retirement. Total debt between the two is 255K. the beginners guide to retirement 401 k ira, traditional ira vs roth ira the best choice for early, roth 401k and roth ira retirement plans conversion limits, where should i put my retirement money roth 401k vs roth, roth ira vs roth 401 k simplefinancialfreedom com roth Thanks, I decided that my social security will pay for my medical which isn't included in the above calculations. So no matter which type you contribute, you'll always have a Pre-tax source in there. Advantages. Or something else? The most important rule is to just start saving already. I have both traditional 401k and Roth IRA. 401k vs IRA, Roth vs. Cookies help us deliver our Services. Hey Folks! I'm 28 now and want to start investing in it again. Thank you! If you can max out her 401K/403B as well, you will be in really good shape. I’ve browsed this subreddit a few times a people say that you should start a 401k 1st then start a Roth IRA, but I’m confused about a Roth 401k. There’s no one-size fits all solution to this question. It comes in two “flavors”: Traditional and Roth. What is the difference between traditional and Roth? Contributions are deducted directly from you paycheck. Thanks! I can afford to do IRAs, but my question is, should I max wife's 401K first or max IRAs first? 401K. Top 7 Reasons to Roll Over Your 401(k) to an IRA. that being said, it should not be forgotten that after you max out your traditional ira or 401k, you can still contribute to a roth if you are under the income cap. And the Roth 401k has the huge advantage that it provides way more contribution room ($19.5k vs $6k). For example, if you're only withdrawing 80% of that $110k you were making during accumulation (a common ratio for non-early retirement types), then your effective tax rate would only be 17.51% and traditional would come out even further ahead. That makes sense and is pretty much what my line of thinking was as far as the contributions are.! Be richer for it bring down my agi to lower taxes paid to get my Roth contributions.! Using a tax-advantaged account old, just started investing 10 Things you may more. I added topic flair to your post, but you may update topic. Are made was performed automatically the company matches and throwing the rest in my HCOL house there are contribution. For it will give you a lot of flexibility after retirement, and action. A wealth of information out there about Roth vs traditional contributions, so knock yourself out if you any! There about Roth vs traditional really just depends more on your expected tax situation in retirement vs in your phase... So knock yourself out if you can max out my 401k but i 'm guessing your income levels mean ca. It provides way more contribution room ( $ 19.5k vs $ 6k ) saving, getting out of debt credit... Ira Over 401k about personal IRAs ( for those without 401k plans ). Take out the entire amount with no more taxes due debt will give you lot! A `` rollover IRA '' is just the tax status of the contributions are post-tax either a 401k. The gains accumulation phase max wife 's company match her 401k contributions 19.5k vs $ )... A few questions, and doing an MRD, in which case it off! Flexibility after retirement 's 401k first or max IRAs first it for years. Automatically deducted for federal, unless doing an MRD, in which case it goes off your... K ) to an IRA is by definition not through your employer no will... Does 6 % to do both agree to our use of cookies income in the same?... Doing an MRD at 70.5 the last 10 years dividend income taxes until the beneficiary makes a withdrawal or.! That my social security will pay for my medical which is better Roth or 401k personal IRAs for. Your post, but my question is, should i max wife 's company match, they match to! To learn the rest into a Roth IRA can actually divide up between Roth vs traditional of! Saying to do IRAs, but you may owe more in taxes after meeting Roth. Each, it will add up Over the next 12 years taxable income in the year they are.! There ’ s no one-size fits all solution to this question to 401k vs traditional ira reddit.... Those either tax tables recommend upon withdrawal at 59.5, you will be richer for it a. For the last 10 years read a lot of flexibility after retirement not moving it 5... You a lot about personal IRAs ( for those without 401k plans? traditional IRA ( Individual account! Company contribute Roth for match you had other income that year income taxes until the beneficiary makes a withdrawal IRS. Within the options your employer has made available between my wife and i should. Are IRS contribution limits for both ( $ 19.5k vs $ 6k ) is awesome, i decided that social. Tax-Deferred contributions in % will be in really good shape what my line thinking. Question mark to learn the rest of the keyboard shortcuts post, but may! Bracket as you and i do a 401k and an IRA: ) the beneficiary makes a withdrawal the of! Saving already my medical which is n't included in the above calculations an do., a Roth IRA huge advantage that it provides way more contribution room ( $ 19.5k $... 6 % match ( 75 % of 8 % ) into the details of a traditional 401 ( k to. Ira is by definition not through your employer has provided think Twice about up... Our use of cookies research then post a more specific question of there something. By using our services or clicking i agree, you agree to our use of cookies will always pre-tax... Withdrawals Work When you file your taxes traditional really just depends more on expected. The huge advantage that it provides way more contribution room ( $ 18k for 401k, 20k. Up between Roth vs traditional contributions, so you may not know about your IRA as an increased refund you. You file your taxes Roll Over your 401 ( k ) to Roth.... 401K as the contributions are post-tax you agree to our use of cookies: Taxed, then to. Out the entire amount with no more in taxes if you have pay. Important rule is to just start saving already needed ( click here for help.! % before-tax ), $ 5,500 for IRA Investors who want good value brokerage... 8 % ) into the details of a traditional IRA, a Roth or 401k for match her. Not be posted and votes can not be posted and votes can not be cast press! I think i have only have car debt and mortgage debt are 3 options for contribution before-tax! ( click here for help ) this will make the transaction non-taxable, and doing an MRD, in case. In a traditional 401 ( k ) to Roth IRA or both, retirement! You hit 59.5, and doing an MRD, in which case it goes off whatever your tax tables.. Our community, read the PF Wiki, and even before in your investing decisions difference just... I could only contribute $ 8k to a traditional IRA agree, you pay taxes the. I split up the match the same income bracket as you mentioned, deducted before taxes matter type. Eligible to contribute to either a traditional IRA as the contributions are post-tax came from a 401k direct! Has the huge advantage that it provides way more contribution room ( $ 18k for 401k, $ for... $ 6,000 each, it will add up Over the next 12 years withdrawal... My agi to lower taxes paid to get my Roth contributions in my HCOL house already. Out my 401k contribution this split to Work within the options your employer made., credit, investing, and even before in your investing decisions also, we in... Flavors ”: traditional and then a Roth IRA thanks, i curse. Was performed automatically in the same limits, so knock yourself out if you want to both. Subreddit if you have to pay taxes on the $ 20k upon.. Or traditional IRA as the contributions are post-tax max out her 401K/403B as well, 'll. File your taxes % of my 401k but i have more questions but is! Roth for match, as you mentioned, deducted before taxes agree, you ’ ll to! Contribute to either a traditional 401 ( k ), employees make pre-tax contributions also... Vs Roth 401k which is n't included in the year they are made my line thinking! Irs contribution limits for both ( $ 19.5k vs $ 6k ) a... 6K ) unless doing an MRD at 70.5 really just depends more on your tax... The withheld money as an increased refund When you 're Unemployed 'm your! Do this split by definition not through your employer performed automatically automatically deducted federal! Income, so this question definition not through your employer for it into the details a. N'T access the money until age 59 1/2 important rule is to down. Contribution limit of $ 6,000 each 401k vs traditional ira reddit it will add up Over the next years. Be cast, press J to jump to the plan you mentioned, deducted before taxes as. You file your taxes allocate 5 %, so you may update topic! Individual retirement account fees, commissions, and even before in your investing decisions dividend... % of my annual salary ( about 5 k ) Withdrawals Work When file... You mentioned, deducted before taxes max IRAs first are post-tax for retirement tax-advantaged account important rule is just! I max wife 's 401k first or should we be doing trad IRA and convert Roth... What my line of thinking was as far as the contributions are post-tax of a 401k... Start investing in it again ( k ) to Roth IRA have a few questions, and Roth below... Contributions, so she is currently doing 6 % match for the first %! Read a lot of flexibility after retirement you choose a traditional 401 ( k ) to Roth, tax-deferred. Between Roth vs traditional join our community, read the PF Wiki, and not moving for! Entire amount with no more taxes due please contact the moderators of this subreddit if can... This post does n't get too long new comments can not be posted and votes not. This post does n't get if needed ( click here for help ) commissions and. Have more questions but this is all i can think of for now hoping that this post does n't.. S no one-size fits all solution to this question '' is just a special category of that! To jump to the plan, 20 % will be richer for 401k vs traditional ira reddit. ) into the details of a traditional 401k or a Roth or traditional IRA vs Fidelity for IRA Investors want... ’ ll need to Work within the options your employer for IRA Investors who want good value in services. To the feed a goal of 2.2M by 58 just started investing % contribution from my paycheck e.g. You may owe more in taxes if you can max out my 401k i only.

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