Advice: 401K/ROTH question

[sadlebred]

Poof

[kadams767]

I would do the Roth IRA. Both for the tax advantage, but also because it can act as a secondary e-fund in your case since you can take out your contributions at any time without penalty if you really need to. So if you decided to stretch and put in a little extra, but then ended up really needing it (I know you’ve had a lot of unexpected expenses come up recently, plus your health issues), you can access the money you put in and won’t owe a penalty like you would with a 401k withdrawal.

[gt7301b]

So the MM individual in me says to open up the Roth and have the money direct deposited each month. However, the practical side of me asks, how likely is that going to actually happen and I'd just increase the contribution at work.

[sadlebred]

gt7301b The ROTH is already there and is contributed to every month. Everything is already automatic.

[ohgillian]

There may be a third option. Many 401(k)s have a Roth option, perhaps you could put the 1% in the Roth 401(k), and that way it would come out of your paycheck automatically.

I have not tried to split my contributions between the Roth and non-Roth, so I’m not sure that this is an option. I have just always contributed 401(k) as Roth since my plan first begin offering that about 15 years ago.

[melmel4854]

I agree with putting it into the ROTH. That is such a bummer they are decreasing the match.

[bee20]

My roth is at vanguard and they let me do auto deposits, which takes away the "automatic" part.

For deciding between Roth and 401k, it sort of depends on expensive your retirement plan is.

-If you think you'll have your house paid for and pretty low (say <40k) expenses overall, the 401k is the better bet. Your taxes won't be much anyway and the extra tax savings will increase the value you can invest today.

-If you're thinking of retiring early, or with with higher expenses the Roth would look more worth it.

I do like PP's point that you can withdraw contributions from a roth if you get in a pinch. If you feel uncomfortable with that extra 1% then that would weight most heavily for me.

[Poppy]

I agree with what bee20 said.

I would put the extra into your Roth IRA for emergency access to the funds. Given what I know about your situation, I would NOT recommend switching your 401k contributions to Roth 401k. That only makes sense above a certain expected retirement income threshold.

[sadlebred]

Oct 22, 2023 18:05:17 GMT -5 Poppy said:

I agree with what bee20 said.

I would put the extra into your Roth IRA for emergency access to the funds. Given what I know about your situation, I would NOT recommend switching your 401k contributions to Roth 401k. That only makes sense above a certain expected retirement income threshold.

I agree with not putting things into the Roth 401K. I expect to be in a much lower tax bracket when I retire. I'm HOPING to partially retire around 62, but we'll see. My goal is to work half for 3/4 time and have time for the hobbies. House paid off--we'll see. (See: divorce) I'd love to do Coast FIRE at 55, but that's not happening.

Everyone has good points about the money being accessible in the Roth. Years ago I pulled $$ out of it to pay for dental implants right after my divorce (see: 2 old crowns failed at the same time & Sadle was broke). So, it's there. I like the idea of putting 1% in there after seeing how pitiful my raise will be this year. We find out early in the year. I'm very likely to go ahead and start putting an extra 1% in the 401K Jan. 1.