Shaun Cassells at MyITForum.com

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401k v ROTH 401k contributions, an advantage somewhere?

I was playing around with contribution numbers when I noticed something.  I am not sure how to use it to our advantage yet…

 
  • If you contribute 10% of your salary to a classic 401k; you save a set amount
  • If you contribute 10% of your salary to a ROTH 401k; you save the exact same dollar amount as you would to a classic 401k

There has to be a way to use that to our advantage somehow.  I’m working on it, but would gladly take any suggestions!

  

The reason a ROTH was created.  Nobody knows what your tax liability (what tax levels will be) when you retire.  I mean if taxes go up to 50%; like it is in France (source) then all your savings in a ROTH will be awesome.  However, it might swing the other way and their might be a 0% tax rate for people in retirement.

 

Okay then what is my best option?  A mixture of taxable retirement savings and ROTH type tax free savings.

 

I am turning 29 next week; I am only sure of one thing.  I will not get social security nor health care the same as they do today.  Plan well and I’ll see you on a beach in my golden years… LOL

Posted: Mar 21 2008, 10:18 AM by scassells | with 4 comment(s) |
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Comments

rporter said:

Hey Shaun, do both! Max your employer match 401k  contributions--pretax if you are in a high tax bracket, after tax if you are in a low tax bracket.

Then, take out a Roth IRA and drop your non-retirement savings in that (up to the max allowed each year).  The Roth money draws interest tax free plus, when you need that new car, you can pull out any or all of the money you added without penalty to pay for it. (you can't touch the interest, until you retire, though).

P.S. do not screw around, put all you can in as soon as you can.  

# March 21, 2008 12:29 PM

scassells said:

I completely agree, but some people who read this don't have the money to max both out... although it should be there goal.

I am still writing blogs about parts, sooner or later, I am going to put a master post up that refers to all these parts :)

# March 21, 2008 12:38 PM

How much money do I need » Blog Archive » 401k v ROTH 401k contributions, an advantage somewhere? said:

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# March 29, 2008 6:19 PM

IRA and 401k » 401k v ROTH 401k contributions, an advantage somewhere? said:

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# April 6, 2008 4:30 AM