Comments on: Thinking It Over: Stopping Roth 401k Deductions http://www.nodebtplan.net/2008/08/01/thinking-it-over-stopping-roth-401k-deductions/#utm_source=rss&utm_medium=rss&utm_campaign=thinking-it-over-stopping-roth-401k-deductions A personal finance blog teaching you how to live debt free and use credit wisely. Fri, 10 Feb 2012 15:18:07 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: JoeTaxpayerhttp://www.nodebtplan.net/2008/08/01/thinking-it-over-stopping-roth-401k-deductions/#comment-2765 JoeTaxpayer Sat, 02 Aug 2008 15:12:49 +0000 http://www.nodebtplan.net/?p=360#comment-2765 If you were to google [pre tax vs post tax ira] (no quotes just the words, I am proud to be the first returned site. The decision process can go either way. If we had a crystal ball, I would look ahead to see what tax bracket you are in at retirement. If you have any defined benefit (pension plan) through any jobs you've held, and what other income you have at retirement. Have you actually saved so much pretax that you are now in a higher bracket? Then, I'd come back to now and look at your savings rate. All that Roth money doesn't count. Not towards forecasting the tax bracket you'd be in at retirement. I'd also ask, today, what bracket you are in now? If you are truly paranoid that tax rates will only go up, do the math and plan to save pretax only enough so at retirement you will be at top end of the 10% tax bracket adjusted for inflation. Too many are focused on how great Roth is, but miss the zero and ten percent brackets at retirement, losing out on the 25/28% tax break today. (I looked at yesterday's post. You don't mention your bracket there, either. 'LivingAlmostLarge' seems to be on the same wavelength as me. The bottom line is to be aware of the huge amount of savings it would take just to top off the 15% bracket when you retire.) Joe If you were to google [pre tax vs post tax ira] (no quotes just the words, I am proud to be the first returned site.
The decision process can go either way. If we had a crystal ball, I would look ahead to see what tax bracket you are in at retirement. If you have any defined benefit (pension plan) through any jobs you’ve held, and what other income you have at retirement. Have you actually saved so much pretax that you are now in a higher bracket?
Then, I’d come back to now and look at your savings rate. All that Roth money doesn’t count. Not towards forecasting the tax bracket you’d be in at retirement. I’d also ask, today, what bracket you are in now? If you are truly paranoid that tax rates will only go up, do the math and plan to save pretax only enough so at retirement you will be at top end of the 10% tax bracket adjusted for inflation. Too many are focused on how great Roth is, but miss the zero and ten percent brackets at retirement, losing out on the 25/28% tax break today.

(I looked at yesterday’s post. You don’t mention your bracket there, either. ‘LivingAlmostLarge’ seems to be on the same wavelength as me. The bottom line is to be aware of the huge amount of savings it would take just to top off the 15% bracket when you retire.)

Joe

]]> By: Stephanie PTYhttp://www.nodebtplan.net/2008/08/01/thinking-it-over-stopping-roth-401k-deductions/#comment-2753 Stephanie PTY Fri, 01 Aug 2008 19:05:51 +0000 http://www.nodebtplan.net/?p=360#comment-2753 Maybe you should just decrease your contributions. Of course, this is moot if you switch over to a traditional 401(k), but in the mean time. Basically, set it up so that you're contributing just enough so that you'll hit the threshold next year at a reasonable date. $1000 was the threshold, right? So less than $100 a month. That way, if you forget to change it back next year, you'll still be contributing enough for the full company match. Sorry to hear about your pup - mine just had surgery so I know how you feel :( Maybe you should just decrease your contributions. Of course, this is moot if you switch over to a traditional 401(k), but in the mean time. Basically, set it up so that you’re contributing just enough so that you’ll hit the threshold next year at a reasonable date. $1000 was the threshold, right? So less than $100 a month. That way, if you forget to change it back next year, you’ll still be contributing enough for the full company match.

Sorry to hear about your pup – mine just had surgery so I know how you feel :(

]]>