An1 savings - Traditional vs Roth 401k
Saw a recent post about how much people saved as an An1 and wanted to ask about Roth 401k saving vs traditional 401k saving.
I was thinking of splitting my contribution to each account in half (about 10% to 401k and 10% to Roth 401k) each paycheck.
Is that a good idea or should I max my Traditional 401k and skip the Roth 401k? I already have a Roth IRA with ~$40k in it and still have to make the contribution for 2025 which is $7k, so would it be stupid to have two post tax retirement accounts?
Any suggestions would be helpful, thanks!
Personally I go Roth. I think if you stay in finance and do a good job saving, you’ll likely be in a pretty high tax bracket later in life so better to just eat the tax now. Plus who knows where taxes will be when we retire given politics/current deficit
The math favors you choosing Roth, especially this early in your career.
A further reason, US tax rates are near all time lows and deficit at an all time high. Very likely taxes will only go up, especially over next 30-40 years, which enhances value of the Roth option. Also takes that tax change risk off the table so you know exactly what you have in retirement, and it provides additional liquidity advantages pre-retirement if needed.
Personally contributing to both. Maxing my Roth first then dumping into 401k. My bank matches after one year of employment. By then I’ll be breaking the Roth contribution limit and transition to fully 401k. Having 14-21k of cash contribution in a Roth at age of 22/23 will grow nicely tax free. Just my thought process
Edit: Roth IRA, and I believe my employer only offers traditional 401k
Roth is an account type that can be applied to an IRA or a 401k. There is no income limit for electing a Roth 401k contribution. In practice, there is also no income limit for making a Roth contribution to an IRA if you use a backdoor Roth.
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Echo the above. I have put everything into Roth. I had some traditional from my contributions early on and from employer matches. I have since converted it all to Roth. Keep in mind that a match you get will likely be in the form of traditional not Roth.
IF, you are at the same tax bracket now as you will be in retirement, Roth vs traditional doesn’t matter. But you almost certainly will be in a higher bracket—you will either still be earning at a much higher rate or your investment income etc after a career in finance should be much larger than what you’re making as an analyst. As others have pointed out, not only will you likely move up in tax brackets, but the entire tax bracket will likely shift up as well. With Roth, what you see is what you have. It will never be taxed again. Roth all day
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