Confused on Regular vs Roth Deferral

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Topic Author
kayaken
Posts: 22
Joined: Thu Jan 14, 2021 8:31 am

Confused on Regular vs Roth Deferral

Post by kayaken »

Hi,

I am maxing out my employer retirement account contributions for CY23 and I have the option to go with regular 401K vs Roth Deferral. Some specs to help:

I make ~$155K
I'll be over 50 in April.
I've been maxing out my contributions.
My wife will have a pension of ~52K when we retire at 63-65.

My question is should I go with Roth Deferral? What else should I be considering for this choice? For now, I'll continue to contribute to my 401k until I figure this out.

Thanks.
hoofaman
Posts: 973
Joined: Tue Jul 14, 2020 3:39 pm

Re: Confused on Regular vs Roth Deferral

Post by hoofaman »

kayaken wrote: Thu Dec 01, 2022 3:48 pm Hi,

I am maxing out my employer retirement account contributions for CY23 and I have the option to go with regular 401K vs Roth Deferral. Some specs to help:

I make ~$155K
I'll be over 50 in April.
I've been maxing out my contributions.
My wife will have a pension of ~52K when we retire at 63-65.

My question is should I go with Roth Deferral? What else should I be considering for this choice? For now, I'll continue to contribute to my 401k until I figure this out.

Thanks.
Does your employer also offer after-tax 401k contributions with Roth in-plan conversion?

https://www.bogleheads.org/wiki/After-tax_401(k)
Topic Author
kayaken
Posts: 22
Joined: Thu Jan 14, 2021 8:31 am

Re: Confused on Regular vs Roth Deferral

Post by kayaken »

Hopefully I answer this correctly. But the plan is offered through Transamerica. They have two choices:

1. Employee Deferrals: Regular Contribution
2. Roth Deferral: Regular Contribution
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retired@50
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Location: Living in the U.S.A.

Re: Confused on Regular vs Roth Deferral

Post by retired@50 »

kayaken wrote: Thu Dec 01, 2022 3:48 pm ... What else should I be considering for this choice? For now, I'll continue to contribute to my 401k until I figure this out.

Thanks.
I'd suggest you check out the wiki page Traditional versus Roth.

Generally, it's about your marginal tax rate now versus your marginal tax rate when making withdrawals, but in your case the additional pension income will impact your tax rate when withdrawing. You'll probably need to go through the exercise of estimating your future marginal tax rate.

Regards,
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Topic Author
kayaken
Posts: 22
Joined: Thu Jan 14, 2021 8:31 am

Re: Confused on Regular vs Roth Deferral

Post by kayaken »

Looked at an online calculator and I think I'll be in the 22% Marginal Tax rate bracket.
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JoeRetire
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Re: Confused on Regular vs Roth Deferral

Post by JoeRetire »

kayaken wrote: Thu Dec 01, 2022 3:48 pm My question is should I go with Roth Deferral?
If you think your tax rate will be higher in retirement than it is now, you should use a Roth 401k.
Otherwise, go with a traditional 401k.
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delamer
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Re: Confused on Regular vs Roth Deferral

Post by delamer »

How much do you currently have in tax-deferred vs. Roth accounts, between you and wife?

In general, it’s good to have investments held in tax-deferred, Roth, and taxable accounts. You have flexibility in withdrawals in retirement that way.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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FiveK
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Re: Confused on Regular vs Roth Deferral

Post by FiveK »

kayaken wrote: Thu Dec 01, 2022 3:48 pm I make ~$155K
Is "I make" the same as "we make"? In other words, would you save 22% marginal (plus whatever state) on contributions now?
I'll be over 50 in April.
I've been maxing out my contributions.
My wife will have a pension of ~52K when we retire at 63-65.
...
Looked at an online calculator and I think I'll be in the 22% Marginal Tax rate bracket.
Where will the other $50K+ income come from in retirement to get you into the 22% federal (plus whatever state) bracket?

In any case, if you really do expect to pay the same marginal rate on both withdrawals later and contributions now, it either doesn't matter or the tie goes to Roth. See “Traditional plus taxable” vs. Roth regarding the latter conclusion.
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cheese_breath
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Re: Confused on Regular vs Roth Deferral

Post by cheese_breath »

What is a Roth deferral? Taxes aren't deferred when you contribute to a Roth.
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Doctor Rhythm
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Re: Confused on Regular vs Roth Deferral

Post by Doctor Rhythm »

cheese_breath wrote: Thu Dec 01, 2022 11:31 pm What is a Roth deferral? Taxes aren't deferred when you contribute to a Roth.
I think it means the income or compensation is deferred.
placeholder
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Re: Confused on Regular vs Roth Deferral

Post by placeholder »

The irs refers to them as designated roth contributions.
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