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<blockquote data-quote="UpstateNYUPSer(Ret)" data-source="post: 2045557" data-attributes="member: 12570"><p>Wolf, you make some excellent points; however, there are others with which I politely disagree.</p><p></p><p>You suggest that those who are single with no children and take the standard deduction should choose the traditional 401k to lower their pretax income. While this is true, what happens when their income increases and they start a family? At that point it may be better to chose the Roth 401k. At this point in time there is no way to roll over the balances from a traditional to a Roth so you would end up with smaller balances in two retirement accounts instead of a larger balance in one.</p><p></p><p>You touched on income based payments on student loans. I do realize that it can be very tough to pay on your student loans when you are first starting out but converting to an income based payment simply extends the loan payment period while adding interest to the loan balance. The ideal would be to contribute to your company retirement up to the level of the match while focusing on paying off your loans. This is what my son is doing. He graduated with about $73K in student loan debt and was fortunate to secure a job which provides a competitive salary, generous benefits and a company match on their 401k. He is contributing up to the match, which ranges from 4-6% depending upon contribution, and is paying extra on his loans.</p><p></p><p>I would recommend the Roth to younger employees just starting out and the Traditional to older employees approaching retirement.</p></blockquote><p></p>
[QUOTE="UpstateNYUPSer(Ret), post: 2045557, member: 12570"] Wolf, you make some excellent points; however, there are others with which I politely disagree. You suggest that those who are single with no children and take the standard deduction should choose the traditional 401k to lower their pretax income. While this is true, what happens when their income increases and they start a family? At that point it may be better to chose the Roth 401k. At this point in time there is no way to roll over the balances from a traditional to a Roth so you would end up with smaller balances in two retirement accounts instead of a larger balance in one. You touched on income based payments on student loans. I do realize that it can be very tough to pay on your student loans when you are first starting out but converting to an income based payment simply extends the loan payment period while adding interest to the loan balance. The ideal would be to contribute to your company retirement up to the level of the match while focusing on paying off your loans. This is what my son is doing. He graduated with about $73K in student loan debt and was fortunate to secure a job which provides a competitive salary, generous benefits and a company match on their 401k. He is contributing up to the match, which ranges from 4-6% depending upon contribution, and is paying extra on his loans. I would recommend the Roth to younger employees just starting out and the Traditional to older employees approaching retirement. [/QUOTE]
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