adding a roth 401k to my portfolio at age 55

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jtmooch2
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adding a roth 401k to my portfolio at age 55

Post by jtmooch2 »

I am 55 and have had a traditional 401k for about 25 years now. I have just started a match plan with my new employer and thought it may be a good idea to open a ROTH 401k. Any thoughts as to if this is a good idea or not?
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retired@50
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Re: adding a roth 401k to my portfolio at age 55

Post by retired@50 »

jtmooch2 wrote: Sun Aug 29, 2021 12:46 pm I am 55 and have had a traditional 401k for about 25 years now. I have just started a match plan with my new employer and thought it may be a good idea to open a ROTH 401k. Any thoughts as to if this is a good idea or not?
Welcome to the forum. :happy

There are several considerations that could enter into the decision. Current tax bracket is one, expected tax bracket during retirement years (72 and beyond) is another. If the traditional 401k is large, and will lead to high dollar amounts for RMDs that gives you more to think about.

See the Boglehead wiki link for more detail:
https://www.bogleheads.org/wiki/Traditional_versus_Roth

Sometimes, people wait until after retirement (but before RMDs begin) to perform Roth conversions.
See link: https://www.bogleheads.org/wiki/Roth_IRA_conversion

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
KlangFool
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Re: adding a roth 401k to my portfolio at age 55

Post by KlangFool »

jtmooch2 wrote: Sun Aug 29, 2021 12:46 pm I am 55 and have had a traditional 401k for about 25 years now. I have just started a match plan with my new employer and thought it may be a good idea to open a ROTH 401k. Any thoughts as to if this is a good idea or not?
90+% of the time, this is a bad idea. Why do you think that this is a good idea?

What is the size of your tax-deferred account? Is it at least 1 million?

The short answer is if you do not know,

Max out your Trad 401K and put the tax savings into the Roth IRAs usually work the best.

KlangFool
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Flyer24
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Re: adding a roth 401k to my portfolio at age 55

Post by Flyer24 »

Welcome to the forum. It is best to give a complete picture of your portfolio so we can provide the best answer. Can you edit your thread using the format in the following link?

Asking Portfolio Questions
HomeStretch
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Re: adding a roth 401k to my portfolio at age 55

Post by HomeStretch »

Welcome to the forum!

+1 to posting in the “Asking Portfolio Questions” format for best feedback.

If you have never had a Roth IRA, it may be a good idea to open one and contribute to start the 5-year clock on initial Roth IRAs.

If you are deciding between Traditional and Roth 401k contributions, this BH wiki page may be helpful:
https://www.bogleheads.org/wiki/Traditional_versus_Roth
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jtmooch2
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Re: adding a roth 401k to my portfolio at age 55

Post by jtmooch2 »

KlangFool wrote: Sun Aug 29, 2021 1:35 pm
jtmooch2 wrote: Sun Aug 29, 2021 12:46 pm I am 55 and have had a traditional 401k for about 25 years now. I have just started a match plan with my new employer and thought it may be a good idea to open a ROTH 401k. Any thoughts as to if this is a good idea or not?
90+% of the time, this is a bad idea. Why do you think that this is a good idea?

What is the size of your tax-deferred account? Is it at least 1 million?

The short answer is if you do not know,

Max out your Trad 401K and put the tax savings into the Roth IRAs usually work the best.

KlangFool
My tax deferred account is $250,000 and I do not contribute to this acct. which is from my prior employer. I thought a Roth with my current employer, who matches 6%, might be better since I feel tax rates might go up in the future.
KlangFool
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Re: adding a roth 401k to my portfolio at age 55

Post by KlangFool »

jtmooch2 wrote: Thu Sep 16, 2021 7:47 am
KlangFool wrote: Sun Aug 29, 2021 1:35 pm
jtmooch2 wrote: Sun Aug 29, 2021 12:46 pm I am 55 and have had a traditional 401k for about 25 years now. I have just started a match plan with my new employer and thought it may be a good idea to open a ROTH 401k. Any thoughts as to if this is a good idea or not?
90+% of the time, this is a bad idea. Why do you think that this is a good idea?

What is the size of your tax-deferred account? Is it at least 1 million?

The short answer is if you do not know,

Max out your Trad 401K and put the tax savings into the Roth IRAs usually work the best.

KlangFool
My tax deferred account is $250,000 and I do not contribute to this acct. which is from my prior employer. I thought a Roth with my current employer, who matches 6%, might be better since I feel tax rates might go up in the future.
jtmooch2,

At 250K and 4% withdrawal per year, that is 250K/25 = 10K per year. Do you believe that you will be taxed more at 10K per year of taxable income in retirement than now?

Yes, it is a bad idea!

Max up your Trad 401K and put the tax savings into Roth IRA is the best combination.

KlangFool
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anon_investor
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Re: adding a roth 401k to my portfolio at age 55

Post by anon_investor »

jtmooch2 wrote: Thu Sep 16, 2021 7:47 am
KlangFool wrote: Sun Aug 29, 2021 1:35 pm
jtmooch2 wrote: Sun Aug 29, 2021 12:46 pm I am 55 and have had a traditional 401k for about 25 years now. I have just started a match plan with my new employer and thought it may be a good idea to open a ROTH 401k. Any thoughts as to if this is a good idea or not?
90+% of the time, this is a bad idea. Why do you think that this is a good idea?

What is the size of your tax-deferred account? Is it at least 1 million?

The short answer is if you do not know,

Max out your Trad 401K and put the tax savings into the Roth IRAs usually work the best.

KlangFool
My tax deferred account is $250,000 and I do not contribute to this acct. which is from my prior employer. I thought a Roth with my current employer, who matches 6%, might be better since I feel tax rates might go up in the future.
Do you have a pension?
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Re: adding a roth 401k to my portfolio at age 55

Post by sailaway »

Your current employer's match is irrelevant to the traditional vs Roth decision. The matching funds will be pre tax, no matter how you make your contributions.

$250,000 isn't a very large number for retirement funds. Do you have IRAs? Taxable accounts? A pension? If you are relying on SS and this $250,000 plus what you can save over the next decade or so, you are unlikely to have to worry a out high taxes in retirement.
wrongfunds
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Re: adding a roth 401k to my portfolio at age 55

Post by wrongfunds »

It pains me to see OP asking the question. May be Wiki should have 100pt bold blinking italic underline font and should say "choose traditional 401K unless you are medical resident and earning peanuts".
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Re: adding a roth 401k to my portfolio at age 55

Post by anon_investor »

wrongfunds wrote: Thu Sep 16, 2021 8:48 am It pains me to see OP asking the question. May be Wiki should have 100pt bold blinking italic underline font and should say "choose traditional 401K unless you are medical resident and earning peanuts".
Or unless maybe you will have a pension or other taxable income (e.g. rental income, trust income, substantial taxable dividend income, etc.)
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Re: adding a roth 401k to my portfolio at age 55

Post by sailaway »

anon_investor wrote: Thu Sep 16, 2021 8:53 am
wrongfunds wrote: Thu Sep 16, 2021 8:48 am It pains me to see OP asking the question. May be Wiki should have 100pt bold blinking italic underline font and should say "choose traditional 401K unless you are medical resident and earning peanuts".
Or unless maybe you will have a pension or other taxable income (e.g. rental income, trust income, substantial taxable dividend income, etc.)

If you need to ask, you will be expected to justify using a Roth 401k, so make sure you do a full case study.

Also, include this keyword to show that you have actually read this wiki.
wrongfunds
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Re: adding a roth 401k to my portfolio at age 55

Post by wrongfunds »

If you have to ask the question, then the answer is obvious :-)
BogleHead1008
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Re: adding a roth 401k to my portfolio at age 55

Post by BogleHead1008 »

With employer matching, you have to do it. Start today....
sailaway
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Re: adding a roth 401k to my portfolio at age 55

Post by sailaway »

Krishmk wrote: Thu Sep 16, 2021 9:33 am With employer matching, you have to do it. Start today....
Why would you say that employer matching means they must go a Roth 401k?? What does the employer match have to do with deciding between Roth and traditional?
wrongfunds
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Re: adding a roth 401k to my portfolio at age 55

Post by wrongfunds »

sailaway wrote: Thu Sep 16, 2021 9:36 am
Krishmk wrote: Thu Sep 16, 2021 9:33 am With employer matching, you have to do it. Start today....
Why would you say that employer matching means they must go a Roth 401k?? What does the employer match have to do with deciding between Roth and traditional?
Huh? Who said that??
sailaway
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Re: adding a roth 401k to my portfolio at age 55

Post by sailaway »

wrongfunds wrote: Thu Sep 16, 2021 10:20 am
sailaway wrote: Thu Sep 16, 2021 9:36 am
Krishmk wrote: Thu Sep 16, 2021 9:33 am With employer matching, you have to do it. Start today....
Why would you say that employer matching means they must go a Roth 401k?? What does the employer match have to do with deciding between Roth and traditional?
Huh? Who said that??
See the quotes: "With the employer match, you have to do it." It is also how the OP phrased their logic. It just doesn't follow.
BogleHead1008
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Re: adding a roth 401k to my portfolio at age 55

Post by BogleHead1008 »

sailaway wrote: Thu Sep 16, 2021 10:24 am
wrongfunds wrote: Thu Sep 16, 2021 10:20 am
sailaway wrote: Thu Sep 16, 2021 9:36 am
Krishmk wrote: Thu Sep 16, 2021 9:33 am With employer matching, you have to do it. Start today....
Why would you say that employer matching means they must go a Roth 401k?? What does the employer match have to do with deciding between Roth and traditional?
Huh? Who said that??
See the quotes: "With the employer match, you have to do it." It is also how the OP phrased their logic. It just doesn't follow.
Right, OP didnt give enough info, except a few words, Roth and matching.. so naturally that is my first assumption that they are missing the free money due to not contributing and that their employer might only be giving the option of Roth 401K..

Like other posters are saying give us more info, then we can help you..... I should have said the same thing without adding any value to the thread...

damn thread police every where
wrongfunds
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Re: adding a roth 401k to my portfolio at age 55

Post by wrongfunds »

sailaway wrote: Thu Sep 16, 2021 10:24 am
wrongfunds wrote: Thu Sep 16, 2021 10:20 am
sailaway wrote: Thu Sep 16, 2021 9:36 am
Krishmk wrote: Thu Sep 16, 2021 9:33 am With employer matching, you have to do it. Start today....
Why would you say that employer matching means they must go a Roth 401k?? What does the employer match have to do with deciding between Roth and traditional?
Huh? Who said that??
See the quotes: "With the employer match, you have to do it." It is also how the OP phrased their logic. It just doesn't follow.
You are right, I thought you were implying that "they must go a Roth 401K". Instead, you were actually questioning it. :oops:

Getting back to the topic, I believe the law allows the matched fund to only go to pre-tax account whether the person contributes to regular 401K or Roth 401K. If you do Roth 401K, the matching fund will go to Regular 401K. You should NOT lose the match.

But why in the world is OP putting it in the Roth 401K? As I said, OP has not said he is medical resident (CEO's son!) So he needs to stick with traditional 401K.
Last edited by wrongfunds on Thu Sep 16, 2021 10:32 am, edited 1 time in total.
sailaway
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Re: adding a roth 401k to my portfolio at age 55

Post by sailaway »

Krishmk wrote: Thu Sep 16, 2021 10:28 am
sailaway wrote: Thu Sep 16, 2021 10:24 am
wrongfunds wrote: Thu Sep 16, 2021 10:20 am
sailaway wrote: Thu Sep 16, 2021 9:36 am
Krishmk wrote: Thu Sep 16, 2021 9:33 am With employer matching, you have to do it. Start today....
Why would you say that employer matching means they must go a Roth 401k?? What does the employer match have to do with deciding between Roth and traditional?
Huh? Who said that??
See the quotes: "With the employer match, you have to do it." It is also how the OP phrased their logic. It just doesn't follow.
Right, OP didnt give enough info, except a few words, Roth and matching.. so naturally that is my first assumption that they are missing the free money due to not contributing and that their employer might only be giving the option of Roth 401K..

Like other posters are saying give us more info, then we can help you..... I should have said the same thing without adding any value to the thread...

damn thread police every where
Is only Roth 401k even a thing?

You say thread police, I say other people are going to read through this and it is dangerous to suggest that a bigger employer match should be the deciding factor to go with a Roth account.
BogleHead1008
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Re: adding a roth 401k to my portfolio at age 55

Post by BogleHead1008 »

sailaway wrote: Thu Sep 16, 2021 10:31 am
Krishmk wrote: Thu Sep 16, 2021 10:28 am
sailaway wrote: Thu Sep 16, 2021 10:24 am
wrongfunds wrote: Thu Sep 16, 2021 10:20 am
sailaway wrote: Thu Sep 16, 2021 9:36 am

Why would you say that employer matching means they must go a Roth 401k?? What does the employer match have to do with deciding between Roth and traditional?
Huh? Who said that??
See the quotes: "With the employer match, you have to do it." It is also how the OP phrased their logic. It just doesn't follow.
Right, OP didnt give enough info, except a few words, Roth and matching.. so naturally that is my first assumption that they are missing the free money due to not contributing and that their employer might only be giving the option of Roth 401K..

Like other posters are saying give us more info, then we can help you..... I should have said the same thing without adding any value to the thread...

damn thread police every where
Is only Roth 401k even a thing?

You say thread police, I say other people are going to read through this and it is dangerous to suggest that a bigger employer match should be the deciding factor to go with a Roth account.
Did you read the thread title before questing it?
Done with this thread as it is not adding any value to anyone
LittleMaggieMae
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Re: adding a roth 401k to my portfolio at age 55

Post by LittleMaggieMae »

jtmooch2 wrote: Sun Aug 29, 2021 12:46 pm I am 55 and have had a traditional 401k for about 25 years now. I have just started a match plan with my new employer and thought it may be a good idea to open a ROTH 401k. Any thoughts as to if this is a good idea or not?
Not enough information. Your current income makes a difference in advice. What you expect your retirement income to be (and where it will come from) matters. How much you have already saved and where (IRA, ROTH, pension, taxable) also matters.

Do you contribute to a Roth outside your employer's plan? Do you contribute the Maximum to your pre-tax 401K?

At 55 you can contribute $19,500 + $6,500 in catch up contributions
At 55 you can contribute $6,000 to a Roth IRA + $1,000 in catch up contributions

ARe you already maxing out these contributions?

(the goodness of a Roth 401K for some people is that more than $6,000 (+1K based on age) can be contributed to a Roth - for high income earners there are better ways to get $$ into a Roth than using up the valuable pretax 401K space. )

And one last thing - I would think having some Roth $$ at retirement is not a bad thing - no matter where your retirement income is coming from. A regular Roth IRA might fulfill this need/want - depending on your financial situation.
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Re: adding a roth 401k to my portfolio at age 55

Post by sailaway »

Krishmk wrote: Thu Sep 16, 2021 10:35 am
sailaway wrote: Thu Sep 16, 2021 10:31 am
Krishmk wrote: Thu Sep 16, 2021 10:28 am
sailaway wrote: Thu Sep 16, 2021 10:24 am
wrongfunds wrote: Thu Sep 16, 2021 10:20 am

Huh? Who said that??
See the quotes: "With the employer match, you have to do it." It is also how the OP phrased their logic. It just doesn't follow.
Right, OP didnt give enough info, except a few words, Roth and matching.. so naturally that is my first assumption that they are missing the free money due to not contributing and that their employer might only be giving the option of Roth 401K..

Like other posters are saying give us more info, then we can help you..... I should have said the same thing without adding any value to the thread...

damn thread police every where
Is only Roth 401k even a thing?

You say thread police, I say other people are going to read through this and it is dangerous to suggest that a bigger employer match should be the deciding factor to go with a Roth account.
Did you read the thread title before questing it?
I did. And from that I did not assume something that either doesn't exist or is rarer than hens' teeth (401k plan with only Roth option).
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Re: adding a roth 401k to my portfolio at age 55

Post by beyou »

I have had the option of Roth 401k for last few years and never put a dime into it. Also in my late 50s, peak earning years, best to get the tax deferral. Even if tax rates rise, my income will decline. I may pay less tax later, maybe same, but not likely more.

I am also in a high income tax state, another factor.
Your fed and state tax brackets if not low then you should stick with traditional and get matching.
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