To 401k or not 401k
#31
in Northern California
Joined: Apr 2014
Posts: 284
Re: To 401k or not 401k
A 401k is never a bad idea. If it comes with an employer match, you gotta be crazy not to sign up.
Open a savings account... have someone else deposit funds into it... and the whole thing is yours to keep. It doesn't get any better than that.
Open a savings account... have someone else deposit funds into it... and the whole thing is yours to keep. It doesn't get any better than that.
#32
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Joined: Jan 2017
Posts: 670
Re: To 401k or not 401k
I'll be taking advantage of one soon, thanks for all the advice. I think the employer matching will cover the costs of withdrawal, no matter what I do with it. And since I can't continue to pay into UK pension, this makes sense in stead while here...
#33
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Re: To 401k or not 401k
So it's come to the time of year where I enroll in benefits and the 401k is something I've looked at again.
What I hadn't realised was there is a choice here.
401k after tax or Roth pre tax
For me at an early stage and just wanting to take advantage of employer matching, should I just go with the standard 401k for now, to get started?
I honestly don't know where I'll retire at this stage...
What I hadn't realised was there is a choice here.
401k after tax or Roth pre tax
For me at an early stage and just wanting to take advantage of employer matching, should I just go with the standard 401k for now, to get started?
I honestly don't know where I'll retire at this stage...
#34
Re: To 401k or not 401k
So it's come to the time of year where I enroll in benefits and the 401k is something I've looked at again.
What I hadn't realised was there is a choice here.
401k after tax or Roth pre tax
For me at an early stage and just wanting to take advantage of employer matching, should I just go with the standard 401k for now, to get started?
I honestly don't know where I'll retire at this stage...
What I hadn't realised was there is a choice here.
401k after tax or Roth pre tax
For me at an early stage and just wanting to take advantage of employer matching, should I just go with the standard 401k for now, to get started?
I honestly don't know where I'll retire at this stage...
Traditional you save paying taxes at today's rate, ROTH you don't pay taxes when you take it out.
This article about IRAs may help
http://www.madfientist.com/traditional-ira-vs-roth-ira/
Last edited by mrken30; Oct 17th 2017 at 1:52 am.
#35
Re: To 401k or not 401k
For me at an early stage and just wanting to take advantage of employer matching, should I just go with the standard 401k for now, to get started? .....
As a side consideration, the more you earn the harder it is to get money into a Roth 401k.
All things considered, the very fact that you are going to set aside anything for retirement puts you ahead of most Americans!
Last edited by Pulaski; Oct 17th 2017 at 2:10 am.
#36
Re: To 401k or not 401k
So it's come to the time of year where I enroll in benefits and the 401k is something I've looked at again.
What I hadn't realised was there is a choice here.
401k after tax or Roth pre tax
For me at an early stage and just wanting to take advantage of employer matching, should I just go with the standard 401k for now, to get started?
I honestly don't know where I'll retire at this stage...
What I hadn't realised was there is a choice here.
401k after tax or Roth pre tax
For me at an early stage and just wanting to take advantage of employer matching, should I just go with the standard 401k for now, to get started?
I honestly don't know where I'll retire at this stage...
I'd do some calculations on if it's worth roth based on your income now, years till retirement, expected income during retirement.
If you're a us citizen during retirement you'll be taxed on worldwide income no matter where your residence is.
If you aren't a us citizen and not in the USA I would guess your tax bracket would likely be lower than it is now - so probably better to go traditional.
Just my layman's 2c.
#37
Re: To 401k or not 401k
It's t'other way around.
There are extensive arguments about future tax rates in general, and what future tax rates you will pay, and whether that makes the Roth IRA a good deal. In short if you expect to earn a packet and retire wealthy, or if you expect tax rates to generally go up then the Roth IRA is for you (because Roth money has already been taxed), otherwise stick with a regular 401k.
As a side consideration, the more you earn the harder it is to get money into a Roth IRA.
All things considered, the very fact that you are going to set aside anything for retirement puts you ahead of most Americans!
There are extensive arguments about future tax rates in general, and what future tax rates you will pay, and whether that makes the Roth IRA a good deal. In short if you expect to earn a packet and retire wealthy, or if you expect tax rates to generally go up then the Roth IRA is for you (because Roth money has already been taxed), otherwise stick with a regular 401k.
As a side consideration, the more you earn the harder it is to get money into a Roth IRA.
All things considered, the very fact that you are going to set aside anything for retirement puts you ahead of most Americans!
#39
Re: To 401k or not 401k
This is the sentence that made me think IRAs and their limits.
"As a side consideration, the more you earn the harder it is to get money into a Roth IRA."
#40
Re: To 401k or not 401k
If you earn more than a certain amount you are no longer allowed to put money into Roth 401k, I don't recall what the number is, but I think it's pretty high .... unless you work in NYC, in which case it is probably relatively attainable.
Last edited by Pulaski; Oct 17th 2017 at 2:11 am.
#41
Re: To 401k or not 401k
Ooops ..... Why did I say IRA? [Been back and fixed it. ]
If you earn more than a certain amount you are no longer allowed to put money into Roth 401k, I don't recall what the number is, but I think it's pretty high .... unless you work in NYC, in which case it is probably relatively attainable.
If you earn more than a certain amount you are no longer allowed to put money into Roth 401k, I don't recall what the number is, but I think it's pretty high .... unless you work in NYC, in which case it is probably relatively attainable.
https://investor.vanguard.com/ira/ro...-income-limits
Today's taxes are on the lower side of the historically average tax rates( for high earners). My guess is they will probably go up in the future.
U.S. Federal Individual Income Tax Rates Over Time - Supporting Evidence
Last edited by mrken30; Oct 17th 2017 at 2:33 am.
#43
Re: To 401k or not 401k
Ooops ..... Why did I say IRA? [Been back and fixed it. ]
If you earn more than a certain amount you are no longer allowed to put money into Roth 401k, I don't recall what the number is, but I think it's pretty high .... unless you work in NYC, in which case it is probably relatively attainable.
If you earn more than a certain amount you are no longer allowed to put money into Roth 401k, I don't recall what the number is, but I think it's pretty high .... unless you work in NYC, in which case it is probably relatively attainable.
But then Roth 401k shares its contribution limits with the traditional 401k, and traditional makes more sense for anyone in a high tax bracket, so contributing to a Roth 401k with high income is possible, but foolish.
#44
Lost in BE Cyberspace
Joined: Jan 2006
Location: San Francisco
Posts: 12,852
Re: To 401k or not 401k
Additionally, although you can always contribute to a traditional IRA, you may not be able to deduct the contribution if you also are covered by an employer's retirement plan (which includes a 401(k)), depending on your adjusted gross income.
https://www.fool.com/retirement/2016...-and-2017.aspx
#45
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Joined: Jan 2017
Posts: 670
Re: To 401k or not 401k
Ok thanks for the replies.
Tax rate could be lower on retirement if you draw less (live more modestly) having paid for most things, like a house and so on? If you fall into a lower bracket?
A new term has been mentioned here, IRA?
I think my benefits offer employer matched contributions that can be 401k, Roth or a mix of the two at any ratio you pick.
I'm still not clear what's best but I'll check as I might be able to change it anytime in which case I could make a start on a plain 401k perhaps.
Also considering I'll be saving for a 2nd house I guess it's a balance between that and retirement savings. My UK pension frozen for now, so was hoping for something to offset that.
Will check the details of the plans tomorrow, see when they can be changed.
I hope this won't over complicate my tax reporting.
I'm still not clear what the IRA bit is though.
Tax rate could be lower on retirement if you draw less (live more modestly) having paid for most things, like a house and so on? If you fall into a lower bracket?
A new term has been mentioned here, IRA?
I think my benefits offer employer matched contributions that can be 401k, Roth or a mix of the two at any ratio you pick.
I'm still not clear what's best but I'll check as I might be able to change it anytime in which case I could make a start on a plain 401k perhaps.
Also considering I'll be saving for a 2nd house I guess it's a balance between that and retirement savings. My UK pension frozen for now, so was hoping for something to offset that.
Will check the details of the plans tomorrow, see when they can be changed.
I hope this won't over complicate my tax reporting.
I'm still not clear what the IRA bit is though.