Roth 401K vs 401K What are differences?
- Thread starter Damondogg
- Start date
UpstateNYUPSer(Ret)
Well-Known Member
Contributions to a traditional 401k are made with pre-tax money while those to a Roth 401k are made with after tax funds. Withdrawals from a traditional 401k are taxed at the rate in effect at the time of the withdrawal while those from a Roth 401k are tax free. Keep in mind that contributions to a Roth 401k will have a greater impact on your net pay than those to a traditional.
The traditional 401k gives you the tax break upfront-----contributions are not taxed and are subtracted from your gross for tax purposes----while the Roth 401k gives you the tax break on the back side.
You cannot roll your traditional 401k balance in to a Roth 401k.
With 10 years in you may better served by suspending contributions to your traditional 401k and initiating them in your Roth 401k. Yes, you will have two separate 401k's, but you will be able to roll over your traditional 401k upon separation and/or retirement to lessen the tax blow.
All new hires should choose the Roth over the traditional.
The traditional 401k gives you the tax break upfront-----contributions are not taxed and are subtracted from your gross for tax purposes----while the Roth 401k gives you the tax break on the back side.
You cannot roll your traditional 401k balance in to a Roth 401k.
With 10 years in you may better served by suspending contributions to your traditional 401k and initiating them in your Roth 401k. Yes, you will have two separate 401k's, but you will be able to roll over your traditional 401k upon separation and/or retirement to lessen the tax blow.
All new hires should choose the Roth over the traditional.
oldngray
nowhere special
The interest earned in a Roth is tax free which can really add up over time. Roth loses most of that advantage if you are closer to retirement and has less time to compound that interest (if you are just starting a new plan). Rollovers to an IRA can be easier with a traditional than with a Roth I think.
upschuck
Well-Known Member
Nobody knows the answer to this, but mainly depends on whether you think taxes be higher, or lower than what they are now.
Also with a Roth, you know exactly how much you have because there is no tax consequence. Your balance will be less*, but you keep it all.
* assuming same take home pay between IRA and Roth options
Also with a Roth, you know exactly how much you have because there is no tax consequence. Your balance will be less*, but you keep it all.
* assuming same take home pay between IRA and Roth options
Brownslave688
You want a toe? I can get you a toe.
Some employees will allow you to roll over your traditional 401k into the Roth. At this time that is not an option at ups but I'm holding out hope that it will be in the future.
UpstateNYUPSer(Ret)
Well-Known Member
Is it even legal to roll over a traditional 401k to a Roth 401k? What about the tax consequences?
Brownslave688
You want a toe? I can get you a toe.
Yes you take the tax hit when you roll it over. Not many employers have Roth 401k even less let you roll your old 401k into it.
I looked into it I would of gladly taken the hit at 26/27 whenever it was that I started the Roth.
Brownslave688
You want a toe? I can get you a toe.
Yes.
You may also want to seek the advice of a financial advisor.
You may also want to seek the advice of a financial advisor.
UpstateNYUPSer(Ret)
Well-Known Member
Yes but it would make zero sense to have both.
Brownslave688
You want a toe? I can get you a toe.
Actually the argument could be made that 50% in both is your safest bet.
UpstateNYUPSer(Ret)
Well-Known Member
The selling point of a 401k is the compounding feature. Dividing the balance between two 401k's reduces the benefits of compounding.
One of my co-workers was a PT sup for a few years. She has her mgt 401k and her Teamster 401k. Both have relatively small balances but combined they would benefit from compounding.
upschuck
Well-Known Member
Mathematically it is the same. Distributive property. (a+b)c = ac + bc where a and b are the accounts and c is the return.
Brownslave688
You want a toe? I can get you a toe.
You said that much better than I could of. Same result either way.
Brownslave688
You want a toe? I can get you a toe.
Even though I love the Roth I'm somewhat happy my wife's employer doesn't offer it. I max out my Roth she maxes her regular.
No matter what happens we should be ok. If all stays as it is I hope to live off hers and continue to let mine grow tax free.
No matter what happens we should be ok. If all stays as it is I hope to live off hers and continue to let mine grow tax free.
satellitedriver
Moderator
All I can say is ,
I hope y'alls ignorance brings you bliss in your retirement.
How in the hell do y'all live your daily life while not learning how to prepare for your future?
I hope y'alls ignorance brings you bliss in your retirement.
How in the hell do y'all live your daily life while not learning how to prepare for your future?
brownmonster
Man of Great Wisdom
Y'all's ignorance. Lol.
