How Roth 401K Can Benefit More than Traditional 401K

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  • Опубликовано: 22 авг 2024
  • I have invested in my Roth 401K and IRA since 2016. I chose Roth because of the tax-free growth, and let me show you how much it'll grow in 10 or 20 years.
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Комментарии • 17

  • @FIREPsyChat
    @FIREPsyChat  Месяц назад +2

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  • @abplayz3998
    @abplayz3998 Месяц назад +1

    Can you discuss about 72T option for those who have high value portfolio in their traditional IRA but still below age 59 1/2. Let say age 53 but ready for early retirement. Thanks

  • @datbio7302
    @datbio7302 Месяц назад

    Dave Rampsy said 100% Yes for Roth 401K!

  • @apichadarunyothin2446
    @apichadarunyothin2446 Месяц назад

    My current strategy for the past 6 years has been maxing out traditional 401k and HSA to reduce my MAGI and then max out Roth IRA every year.
    If i do Roth 401k , i will not be able to max out contribution to Roth IRA , perhaps no contribution at all due to income limits.
    So in my case , total contribution for Roth 401k is just $23,000 but if i do traditional 401k , my total contribution will be $30,000 ($23,000 for 401k + $7,000 for Roth IRA)
    Do you think the traditional 401k + Roth IRA look better for investment in my case?

  • @1968Dmiller
    @1968Dmiller Месяц назад +1

    What is the max I can contribute to a Roth 401k at age 56. Thanks

    • @alrocky
      @alrocky Месяц назад

      $30,500 to Roth 401(k) for 2024.

    • @datbio7302
      @datbio7302 Месяц назад

      if your 401k plan offer after contribution + in plan conversion, you can tab on to even more contribution to ROTH. Search for 415c limit.

  • @Btmaster8
    @Btmaster8 Месяц назад

    If someone were at a 32% or 35% marginal tax rate, would doing a Roth 401K over a Traditional 401K still make sense regarding tax savings? Is there a way to easily figure this out? Thanks for the great content as always!

    • @alrocky
      @alrocky Месяц назад +1

      $23,000 / 0.68 = $33,823.53 pretax income needed to contribute $23k to Roth 401(k) in 32% Federal Tax Bracket so $10,823.53 Federal Tax.
      $23,000 / 0.65 = $35,384.52 pretax income needed to contribute $23k to Roth 401(k) in 35% Federal Tax Bracket so $12,384.52 Federal Tax.

    • @FIREPsyChat
      @FIREPsyChat  Месяц назад +2

      Would you consider doing a combination of both traditional and Roth? I hate to say it depends but it really depends on your situation

    • @raining1975
      @raining1975 Месяц назад +1

      It's just marginal vs effective.
      85k Salary
      Would you rather lock in 22% now to pay 0% later or avoid 22% now to pay 13% later.
      125k Salary
      Would you rather lock in 22/24% now to pay 0% later or avoid 22/24% now to pay 16% later.
      230k Salary
      Would you rather lock in 32% now to pay 0% later or avoid 32% now to pay 21% later.
      This doesn't paint the full picture since SS would be taxed and fill up some of the std ded and lower brackets. But you are also not putting $ into retirement accounts in retirement, so to get the same usable income as you had when working you can withdraw 73% of your salary if you were putting 20% aside (you don't pay FICA taxes on unearned income, which is ~7%). Sure, taxes can go up but if you think peoples' effective taxes will be raised by 8+%, then IDK what to tell ya.

  • @kirk0831
    @kirk0831 Месяц назад

    How about you use the money that you pay tax for the 24% tax brackets and invest??

  • @sanny.g
    @sanny.g Месяц назад

    How is that better when you can only contributed 7k max a year i don't have 40yrs to wait grow

    • @FIREPsyChat
      @FIREPsyChat  Месяц назад

      7K is for your IRA. You can also contribute up to 23k for your 401k and that’s what this video is about. They’re not your only options so you don’t have to wait 40 years.

  • @gofman1109
    @gofman1109 Месяц назад

    Rule 72T

  • @Nonya969
    @Nonya969 Месяц назад

    You’re getting taxed on employer matches as well, and if you leave before you’re fully vested there is no easy way to get those taxes back-to my knowledge, definitely could be wrong and would love to hear if there are systems in place for this scenario

    • @alrocky
      @alrocky Месяц назад

      You owe no tax on employer 401(k) match if you leave before you become vested. That match and it's earnings are simply removed from your t-401(k) balance and returned to employer.