TimC Posted April 7, 2009 Share Posted April 7, 2009 I'm thinking of just putting enough into my 401(k) to cover the employer match and dumping the rest into a Roth IRA since it is taxed up-front and is tax-free later as opposed to the 401(k) with is tax-free now and is taxed later. Why? Because I feel taxes will be greatly (and I mean greatly) increased to pay for these deficits we plan on running. That 401(k) tax is going to crush you later compared to the Roth IRA tax now. In fact without the free 50% match from the employer, I doubt I'd even be in a 401(k) now. I guess the argument can be made that they can always change the rules on the Roth IRA and tax you when you eventually withdraw. But, they can always raise the taxes on the 401(k) as well. Thoughts? Quote Link to comment Share on other sites More sharing options...
dmarc117 Posted April 7, 2009 Share Posted April 7, 2009 i agree with you. taxes will be higher. but whats stopping the usg from simply changing the tax laws 10,20 years down the road and taxing those things too? i have both, trying to offset the govt risk!! Quote Link to comment Share on other sites More sharing options...
Guggs Posted April 7, 2009 Share Posted April 7, 2009 Max out your Roth IRA first, then, if you can afford it, contribute as much as possible to your 401K. I have been doing that for years. Quote Link to comment Share on other sites More sharing options...
TimC Posted April 7, 2009 Author Share Posted April 7, 2009 Max out your Roth IRA first, then, if you can afford it, contribute as much as possible to your 401K. I have been doing that for years. Yeah, I've been basically doing the opposite. I've always looked to put as much into the 401k. Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted April 7, 2009 Share Posted April 7, 2009 Thoughts? Two years ago my financial adviser (who I've met once, I'm not that f'n rich) advised opening a Roth for that exact reason - unknown tax rates. I still haven't but probably should. Anyone know offhand what the annual contribution limit is? Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted April 7, 2009 Share Posted April 7, 2009 Two years ago my financial adviser (who I've met once, I'm not that f'n rich) advised opening a Roth for that exact reason - unknown tax rates. I still haven't but probably should. Anyone know offhand what the annual contribution limit is? To answer my own question, the limit for Roths is $5,000 for under-50s, $6,000 for over 50s. That isn't exactly hugh. Married couples can have one each so a single earner can max out both if they want, doubling the effective limits. For reference, 401k limit is $16,500 for under 50s and $22,000 for over 50s. Quote Link to comment Share on other sites More sharing options...
Square Posted April 7, 2009 Share Posted April 7, 2009 I max out my Roth IRA (I believe it is up to 5k a year now) and then usually contribute up to the match in a company 401k. Typically, I want to put 15% of my income into retirement so sometimes I go up above the employer match just because it is a small percentage and the tax deferment makes it a slightly better deal. I believe the government is batchit crazy sometimes but I really do not see any way that they could retroactively tax your post tax dollars that are in a Roth IRA. That would be a hugh deal and voters would kill whoever thought of the dumb idea. The safest bet is that they will get the original tax of your money but after that, there won't be any future taxes on it. Roth IRA > 401k but I use both to some extent. Quote Link to comment Share on other sites More sharing options...
geeteebee Posted April 7, 2009 Share Posted April 7, 2009 Many employers have adopted Roth 401k's since they were allowed a couple of years ago. I switched my contributions to that so I still get the company match but my contributions go in after tax. You ought to check with your HR department to see if your company offers them. Quote Link to comment Share on other sites More sharing options...
Big Country Posted April 7, 2009 Share Posted April 7, 2009 I'm like many of the above... I have both and I do what I can to max out both. I guess I'm just a dreamer thinking that letting my pretax money hopefully grow, tax free for 30+ more years will be better than just lettin it be taxed now, though I am hedging that with the ROTH IRA. ROTH 401K not an option at my work yet, though I have heard it may be added in as soon as next year, at which point, I will most likely contribute to that. Quote Link to comment Share on other sites More sharing options...
Skippy Posted April 7, 2009 Share Posted April 7, 2009 Max out the Roth first and foremost. I think that if tax laws are going to change on the Roth money then it should only be on the part that grew based on what you put in there first since you already paid tax on the money that you put in the Roth. Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted April 7, 2009 Share Posted April 7, 2009 Roths have contribution limits based on gross income too. $105k for singles, $166k for couples. Over those thresholds, contributions are phased lower than the (already small) cap. Quote Link to comment Share on other sites More sharing options...
Perchoutofwater Posted April 7, 2009 Share Posted April 7, 2009 i agree with you. taxes will be higher. but whats stopping the usg from simply changing the tax laws 10,20 years down the road and taxing those things too? i have both, trying to offset the govt risk!! It is sad you have to do that, but anyone with half a brain is thinking the same thing. Quote Link to comment Share on other sites More sharing options...
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