I have a question for those of you with experience in this area.


I'm currently contributing 10% of my Salary to my 401k. Starting July 1st, the company is now offering a Roth 401k option as well.

What is the best move here? I'm 26.

Does it make more sense to split the 10% and do 5% and 5% between the standard and Roth? Should I be contributing more to the Roth vs. the standard? Should I continue to contribute 10% to my 401k and then 5% to the Roth? Is it even worth it to open this additional account?


Thanks for your help guys.

 

First, does your employer offer any kind of matching on any of the accounts? That is most important.

 

No. Not at the moment.

 

If it matters... the acounts are held through T. Rowe Price.

 

5% and 5% is a good mix.

i am personally 8% roth 401k and 2 % regular. additionally, i max out my roth ira. if you know u will be making a lot of money in the future, roth 401k is the way to go. so when u roll over u can manage the funds yourself tax free!!!

there is no definite answer because nobody knows what the tax environment will be like in the future...democrats are gonna win...

u want to have some regular 401k because the best late game strategy is to pull money from these accounts and deduct medical costs, so as you age and your limbs start to fall off, you will enjoy never really paying taxes on teh 401k funds. but u enjoyed the faster growth from high levels of contribution relative to roth...

^ probably could have written it better, but i hope u get the gist.

 

[QUOTE=trainwreck,Jun 24 2008, 09:03 AM] 5% and 5% is a good mix.

 

yup, although my brokerage account is really small. i do most my trading in a roll over account and roth ira. dividend yielding stocks i trade in regular brokerage, growth i trade in roth.

 

BINGO!
What will the tax rates be 30 years from now when you retire??? Who knows. There are some people who believe the govt will find a way to tax Roth gains somehow

Considering your young age and the fact that you'll make more income as you get older, i'd say Roth is a good way to go.....go 50/50 and hedge your bets

 

its all on betting the future effective tax rate.

if its higher than now a roth 401K is the option to go with....if its lower....then a pre-tax regular 401K contribution is what you want to do.


I would probably split it.

And don't think you are safe putting money in a 401K or a roth IRA or any of those. These dems are looking for money.....and they aren't afraid to go into peoples 401K's and tax them. They could even tax roth's......they are ruthless.

We are a socalist country basically....on the verge of almost going communism as they want to start to nationalize the oil companies or other companies like health care or health insurance.

 

My opinion is 180* from yours on Roth vs. regular IRA.
If the tax rate is higher now, I would got with regular IRA as this is pre-tax dollars and if you thnk the rate is higher now than it will be at retirement, then you're paying less tax on withdrawals (as a % rate) than you would have paid on the money being deposited.

Some of us think that today's tax rate is lower than what it will be when we retire. In that case, it makes more sense to use the Roth and pay taxes on contributions at today's rate, but pay no taxes on any gains when withdrawn in the future when we expect the tax rate to be higher.

Just my .02