Anyone doing the Roth 401k option?

[LeddySS98]

I'm 35 y/o and have been driving for 8 years... I dont 'think' the roth 401k was a option when i signed up but I see it there now... is there a right or wrong answer as to whether I should be using that one vs the traditional 401k? pay less federal taxes now, vs paying them later...

Just looking for some guidelines and/or opinions.

Thx Guys...

 

[Brownslave688]

There are a couple good threads on this in the retirement section.

 

[LeddySS98]

sorry

 

[UpstateNYUPSer(Ret)]

At your age and with relatively few years in the Roth would be the better option for you. Keep in mind that you do not get the tax benefits of the traditional while you are working, as your contributions have already been taxed, but you will enjoy your withdrawals tax free.

The Roth will be the way to go as I do see the government going after our 401k's as they continue to search for new sources of revenue.

 

[HEFFERNAN]

I can't see the gov't ever getting away with double taxing retirement funds. What ever political party brings it up would be absolutely destroyed. Feeding off the responsible citizens in America would be the beginning of the end.

Personally, I use the traditional 401k option. I like the tax benefits now and IF I get taxed more in the future, those extra dollars will come from future growth. I do this knowing Dave Ramsay and Clark Howard both agree the Roth is the best option out there.

 

[Future]

Does it have any thing to do with David Lee Roth?

 

[Overpaid Union Thug]

I'm 35 y/o and have been driving for 8 years... I dont 'think' the roth 401k was a option when i signed up but I see it there now... is there a right or wrong answer as to whether I should be using that one vs the traditional 401k? pay less federal taxes now, vs paying them later...

Just looking for some guidelines and/or opinions.

Thx Guys...

I use the Roth. It hasn't always been available but I switched from the traditional 401k as soon as I noticed the Roth was available. Most financial advisors recommend that employees opt out oft he traditional 401k and go for the Roth if their employer doesn't match the 401 contributions. If you do this take a long hard look at your tax situation. If you are like me and want to keep as much of your paycheck every week (opposed to paying too much and essentially giving Uncle Same an interest free loan ever year) and claim more on your W4 then you will most likely have to lower the number.

 

[raceanoncr]

Correct me if I'm wrong (and I know you all will), but in the Roth, you're only allowed to contribute, what, up to 5-6 thou a yr? But in traditional 401K you're allowed 15 (or more now) per year?

When in, I did both, maxed out both. Every year.

401 ain't taxed now but will be when I start taking out, hopefully, and right now it is, a lower tax bracket.

Roth is ALREADY taxed so when I start taking out, it's free and clear. So far this year, I've made a ton on both. So, basically, it's a "take yer pick" kinda thing.

 

[Jones]

Correct me if I'm wrong (and I know you all will), but in the Roth, you're only allowed to contribute, what, up to 5-6 thou a yr? But in traditional 401K you're allowed 15 (or more now) per year?

When in, I did both, maxed out both. Every year.

401 ain't taxed now but will be when I start taking out, hopefully, and right now it is, a lower tax bracket.

Roth is ALREADY taxed so when I start taking out, it's free and clear. So far this year, I've made a ton on both. So, basically, it's a "take yer pick" kinda thing.

The 5K limit is for the after tax 401k, which is still available (I think). The limit for the the Traditional and the Roth is 17500 combined, so you can put 17.5K in the Roth if you don't put anything in the traditional.

 

[UpstateNYUPSer(Ret)]

The 5K limit is for the after tax 401k, which is still available (I think). The limit for the the Traditional and the Roth is 17500 combined, so you can put 17.5K in the Roth if you don't put anything in the traditional.

There is an additional $5.5K "catch-up" for us folks who are 50 or older.

 

[brett636]

I switched completely over to the ROTH myself when I noticed the option was available. I'm just a few years younger than you and my outlook is the government will require higher taxes in the future making the ROTH an easy choice. I also wasn't happy with the fact that when I looked at my 401k balance when it was strictly traditional knowing that 20%-30% of it really belongs to the government, and I am just being allowed to hold onto it in the meantime.

 

[UpstateNYUPSer(Ret)]

When you say you "switched over completely" I assume you mean directing all future contributions and investment options but not transferring any or all of your traditional balance. Am I right?


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[brownmonster]

I switched completely over to the ROTH myself when I noticed the option was available. I'm just a few years younger than you and my outlook is the government will require higher taxes in the future making the ROTH an easy choice. I also wasn't happy with the fact that when I looked at my 401k balance when it was strictly traditional knowing that 20%-30% of it really belongs to the government, and I am just being allowed to hold onto it in the meantime.

If the government is looking for additional tax revenue in the future, who's to say they would look to tax the Roth earnings?

 

[brett636]

When you say you "switched over completely" I assume you mean directing all future contributions and investment options but not transferring any or all of your traditional balance. Am I right?


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Yes, that is what I meant. To the best of my knowledge there is no way to transfer traditional 401k money into the Roth 401k. As of now my Roth contributions makes up more than 55% of my 401k's value.

If the government is looking for additional tax revenue in the future, who's to say they would look to tax the Roth earnings?

That is an unknown at this point. I can only account for the way the rules work now, and its impossible to predict how they will work in the future so I can't plan for that. Not to mention the only real way to avoid this is to not save at all which is not an option in my book. I can predict with fairly good certainty that tax rates will rise, and that traditional 401k withdrawals will be subject to those tax hikes while Roth 401k withdrawals will not.

 

[UpstateNYUPSer(Ret)]

Brett, wouldn't it make more sense to compound interest on one larger balance as opposed to two smaller ones?

There is no way to combine the two while you are still working.


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[brett636]

Brett, wouldn't it make more sense to compound interest on one larger balance as opposed to two smaller ones?

There is no way to combine the two while you are still working.


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I'm 31 years old as of right now, and unless things change I plan on waiting till my 35 years fulltime which will make me 59(the same year I can withdraw from my 401k penalty free) at that point. Thats plenty of time for compound growth to do its magic and turn my little nest egg into a much larger one. I will still have the traditional portion of my 401k and it is still growing, but just by pure growth and not by any future contributions on my part. Considering I have both portions of my 401k invested in the same funds both are growing at about the same rate, but all the growth on the Roth side I get to keep(for now) while I will only see around 70%-80% of the growth on the traditional once taxes are figured in.

 

[purplesky]

I'm 35 y/o and have been driving for 8 years... I dont 'think' the roth 401k was a option when i signed up but I see it there now... is there a right or wrong answer as to whether I should be using that one vs the traditional 401k? pay less federal taxes now, vs paying them later...

Just looking for some guidelines and/or opinions.

Thx Guys...

Chances are the teamster pension will be in big trouble by the time you can retire from UPS and collect a check. SO DO NOT COUNT ON THE TEAMSTER PENSION BEING COMPLETELY THERE IN 25 to 30 YEARS?

If the Teamster pension is still around in 30 years it will be paying out much lower monthly amounts per Teamster member. SO YOU WILL BE IN A LOWER TAX BRACKET IN RETIREMENT UNLESS YOUR WIFE IS A DOC OR CEO?

I would take the tax break now in the UPS/Teamster traditional 401k and do a Roth outside of the 401k with Fidelity or Vanguard or Scott trade,etc.

There isn't a right or wrong answer. But doing both the traditional 401k and a Roth is a win win.

Its part of a bucket strategy for retirement saving. Google it and you can find lots of great info.

The fact that you are saving at 35 is awesome. I know way too many Teamsters that aren't saving in the 401k at all. I just don't get it?

There is a right wing movement in this country to destroy all the unions and pensions and most Americans just don't seem to care?

 

[UpstateNYUPSer(Ret)]

Brett, my plan is to roll my traditional 401k in to an Edward Jones account, transfer the funds and close my Roth IRA and let my money guy work his magic to let the combined balances grow while I live off of my pension. I will start drawing SS at 67 or 70 with those funds directed to that same account. I hope to sell my condo but may either keep it as a rental or give it to my son so he can sell it and put it toward his $70K in student loans.


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[brett636]

Brett, my plan is to roll my traditional 401k in to an Edward Jones account, transfer the funds and close my Roth IRA and let my money guy work his magic to let the combined balances grow while I live off of my pension. I will start drawing SS at 67 or 70 with those funds directed to that same account. I hope to sell my condo but may either keep it as a rental or give it to my son so he can sell it and put it toward his $70K in student loans.


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Given the fact that you are much closer to retirement than I am the argument for the Roth becomes less relevant. Having a solid plan period is better than no plan which is what most of my older co-workers have now. I see the results of that with my parents who did very little retirement planning up until recently. Personally I don't want to be in that boat and with time on my side I don't believe I will.

 

[UpstateNYUPSer(Ret)]

I see the same in my center. Guys want their toys and think that our pension will be enough.

You may be able to withdraw from your 401k earlier than 59--- it's called the Rule of 72.


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