But unlike a traditional IRA, contributions are made with after-tax dollars and withdrawals or distributions from Roths are tax-free. Generally, the advice is to maximize 401k contributions to company match (not matx to $18,000), and then Roth IRA, which would give you a mix of tax deferred and after tax retirement … asked May 8 '10 at 17:20. A Roth 401k will likely make you richer than a traditional 401k and is one of the best investment decisions you can make as a younger investor in your 20’s or 30’s because of the tax-free withdrawal advantages given an uncertain future. One of the most-asked questions in personal finance is whether to sign up for a 401(k) or a Roth 401(k) retirement plan through your employer. Because you contributed to your traditional IRA with after-tax income, it has a "basis". And the tax deduction might also have a side benefit of lowering your AGI, possibly making you eligible for a Roth IRA. First contributed directly to the Roth IRA. On the other hand, you'll typically pay income taxes on any money you withdraw from your traditional 401(k), 403(b), or IRA in retirement. I originally intended to just put more money in a traditional IRA without an intent to convert until I was ready to figure out the backdoor Roth process. Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. share | improve this question | follow | edited May 9 '10 at 15:53. If you rolled a traditional 401 (k) into a Roth IRA, the clock starts ticking from the date those funds hit the Roth. I have good $$ savings in traditional 401k and planning to leave it untouched until retirement (30 years). Traditional contributions are pre-tax and tax deductible, Roth contributions are made with after tax money (i.e. This explosion in popularity and the fear of taxation has resulted in widespread belief that the Roth accounts are superior to Traditional. With equal tax rates, tax-deferal (dudctible traditional IRA) and tax-free growth (Roth IRA… Your income will be the main factor. If I max my contribution this year in TRADITIONAL (let's just round up and say 20k) I will … 401k is employer, IRA is individual. More posts from the personalfinance community. I have a 401k plan that allows for after-tax contribution and rollover to IRA, both Roth and traditional. Like a traditional IRA, assets in the account grow tax-free. This is important because Traditional (pre-tax) savings during your working years help you avoid taxes at your current marginal tax rate, but retirees generally pay taxes on withdrawals starting in lower tax brackets. by Creative_Deficiency . The total amount transferred will be taxed at your ordinary income rate, just like salary." The IRA contribution limit in … Note that if you decide on Traditional contributions (401(k) and/or IRA) and those bring your MAGI down enough that your marginal tax rate is definitely 12% then you should almost certainly make Roth contributions (401(k) and/or IRA) for the remainder of the year. If you invest 18.5k in Roth you get no tax … Once you've maxed out your HSA, see if you qualify to contribute to a Roth IRA. For each year where you made such a contribution, you'll fill out and file a Form 8606 with the IRS indicating the non-deductible amount of the contribution. So say you're solidly in the 24% federal bracket (say, single and make $110k) and you have no state income tax. What I should have done was use pre-tax dollars for the traditional IRA account, but didn't think about the implication until recently. I did the same mistake years ago, and only realized it a couple years ago. In a Traditional IRA, when you contribute money, that money goes straight in and is not taxed the year you make it. For instance, should my IRA provider be cutting two separate checks to roll over to my 401K provider? There are several general factors to consider: Here's a self-description of someone who should probably go Roth: Here's a self-description of someone who should probably go Traditional: No single item is definitive. Here is the info I found on the conversion: "When you roll over a traditional 401k to a Roth IRA, you'll owe income taxes on that money in the year you make the switch. From a tax filing perspective, I haven’t indicated the traditional IRA amounts are being funded with after-tax income. Converted a traditional IRA to the Roth IRA. ._2JU2WQDzn5pAlpxqChbxr7{height:16px;margin-right:8px;width:16px}._3E45je-29yDjfFqFcLCXyH{margin-top:16px}._13YtS_rCnVZG1ns2xaCalg{font-family:Noto Sans,Arial,sans-serif;font-size:14px;font-weight:400;line-height:18px;display:-ms-flexbox;display:flex}._1m5fPZN4q3vKVg9SgU43u2{margin-top:12px}._17A-IdW3j1_fI_pN-8tMV-{display:inline-block;margin-bottom:8px;margin-right:5px}._5MIPBF8A9vXwwXFumpGqY{border-radius:20px;font-size:12px;font-weight:500;letter-spacing:0;line-height:16px;padding:3px 10px;text-transform:none}._5MIPBF8A9vXwwXFumpGqY:focus{outline:unset} With traditional, most early withdrawals will trigger a 10% penalty. Besides IRA being available at workplace, there are two basic types – Traditional IRA established in 1974 and Roth IRA launched in 1997 named on its sponsor, Sen. William Roth. Like a traditional IRA, assets in the account grow tax-free. No, because you can also invest the tax savings from investing in a traditional 401k. If you’ve been contributing to the IRA with after-tax dollars and not taking the deduction why didn’t you immediately convert to Roth? This particular point is confusing. (TD Ameritrade), How Do Tax Brackets Actually Work? More context: I save about 70% of my income and already max out my 401k (pre-tax historically), Roth IRA (barely under the income limits), and HSA. (Only applies to IRAs) I exceed the income limit for making fully-deductible contributions to a Traditional IRA, but am below the Roth IRA phase-out income limits. Join our community, read the PF Wiki, and get on top of your finances! It might not make sense to contribute to a traditional IRA and 401(k) in the same year because those two kinds of accounts are designed to do exactly the same thing. You are free to do that as long as your income does not exceed the limits of making a Roth IRA contribution. Traditional IRA tax benefits. Rolled over a Roth 401(k) or Roth 403(b) to the Roth IRA. Just realize that everyone has an opinion about everything. Your tax rate could go down in the future. Then there are no additional taxes to be paid when the money is withdrawn later. Does my 401K provider take my word for it, and I just make sure I file Form 8606 to indicate the after-tax amounts? With traditional, you pay a lot less in taxes now, put more into 401k, but you later have to pay taxes during retirement. I expect periods of very low income that will be opportunities to convert to Roth, such as years spent going back to school, starting my own business, early retirement, or staying home with my kids. This is an oversimplification and you should probably read the above text, make a post to ask for advice, or consult with a financial advisor. A mega backdoor Roth lets people save as much as $37,500 in a Roth IRA or Roth 401(k) in 2020. And the Roth component of a Roth 401(k… You'll need to complete Part I only, and you do not need to file an amended return. (The other is converting a traditional IRA to a Roth IRA, also known as a backdoor conversion.) High income: If you make too much to get a full deduction for a Traditional IRA, you should do a Roth IRA (backdoor method if needed) rather than Traditional IRA. /*# sourceMappingURL=https://www.redditstatic.com/desktop2x/chunkCSS/TopicLinksContainer.361933014be843c79476.css.map*/How does my 401K provider know what is considered the pre vs post-tax amounts from my IRA? If you rollover to a Roth IRA instead of traditional IRA the amount you rollover will be taxed as income, so depending on the rest of your financial situation and the amount in the 401k, this may … The other major difference between 401k and Roth IRA is the way they are managed. Facebook Twitter Reddit Email RSS Feed Newsletter Donate. 401(k) funds are not the only company retirement plan assets eligible for rollover. I expect to need some of my retirement savings before age 65. I’d like to start doing a backdoor Roth IRA starting in 2021 since I don’t qualify for it directly. I am currently in one of the higher tax brackets. (Anywhere it says "401(k)" below will generally also apply to 403(b) plans, 457 plans, and the TSP.). So, if you make $70,000 and contribute $10,000 to your 401k then you’re only taxed on $60,000 income (for Federal taxes- state policies vary). This explosion in popularity and the fear of taxation has resulted in widespread belief that the Roth accounts are superior to Traditional. Basically it boils down to whether a person wants to pay taxes now, or when he retires. Essentially separating them. A Roth … From a tax filing perspective, I haven’t indicated the traditional IRA amounts are being funded with after-tax income. The most important part of wealth building is consistent saving every month, no matter what the market is doing. The Roth 401(k) was introduced in 2006 and was designed to combine features from the traditional 401(k) and the Roth IRA. If you don't have a 401(k) through work, you can contribute to both a traditional IRA and a Roth IRA as long as your combined contributions don't exceed the $6,000 or $7,000 annual limit. It's all worth some consideration. I currently work in a state with low income tax, and/or I will retire to a state with very high income tax. But not all 401(k) plans allow them. After that, they will maximize 401k contribution. I’ve been contributing to this traditional IRA with after-tax income. (Two Cents), Your current marginal tax rate compared to your expected, Your state income tax rate now and in retirement (possibly a different state), The higher effective limits on Roth contributions. you already paid taxes on your contribution. You say you're contributing the maximum to your Roth 401(k), but you may want to consider splitting your contribution between your traditional 401(k) and your Roth 401(k). How does my 401K provider know what is considered the pre vs post-tax contributions? It is important to note that a traditional 401(k) plan can be rolled into a Roth 401(k) plan. I max out all my tax-advantaged contributions and. His Roth IRA, like Sara and Brian's traditional IRAs, grows to $38,061, but unlike them he doesn't have to pay any tax when he withdraws the money. The tax structure of a traditional IRA is the main difference from a Roth IRA, and it can be a great benefit for people looking to reduce their taxable income right away. RMDs can be a hassle in traditional … The most you can contribute to all of your traditional and Roth IRAs is the smaller of: For 2019, $6,000, or $7,000 if you’re age 50 or older by the end of the year; or your taxable compensation for the year. You can have a 401(k) plan with a Roth 401(k) provision and still fund a Roth IRA. Some articles about this topic will use the term "average" tax rate to describe this concept. If you didn't claim it as a deduction, covert it to a Roth IRA. One key call out - I’ve been contributing to this traditional IRA with after-tax income. High income: If you're in the 32% tax bracket or above, favor Traditional 401(k) contributions, read below for more. The Roth IRA gives Sam 2 advantages over the other 2 investors: First, the Roth IRA captured all of Sam's tax savings—so unlike Brian, he's safe from the temptation to spend it before retirement. This provides a bit of tax diversification, giving you a tax deduction now as well as tax-free withdrawals later. A Roth IRA has three main features. But if I’m choosing between a traditional 401(k) and a Roth 401(k), I’d go with the Roth 401(k) every time! Then convert the after-tax contributions amount to a Roth IRA and moving forward you can do a backdoor Roth with no tax hit. The same with investing. Roth or Traditional? First, you will deposit money (a maximum of $6,000 in 2020 and 2021) to a traditional or non-deductible IRA. Is there anything I can do to ensure I don't get double taxed on this? Can I Have Roth 401k and Roth IRA? Press J to jump to the feed. If you’re investing consistently every month—whether it’s in a Roth 401(k), a traditional 401(k) or even a Roth IRA—you’re already on the right track! The income limits for the Roth IRA apply only to Roth IRA contributions, so you could still contribute to a traditional IRA up to the $6,000 (or $7,000) limit. Even if you participate in a 401 (k) plan at work, you can still contribute to a Roth IRA and/or traditional IRA, as long as you meet the IRA's eligibility requirements. Return to main page . What do you mean about the tax filing portion? (Only applies to IRAs) I expect to have a very high income in the future and will need to use the Roth IRA backdoor in order to make IRA contributions at some point in the future. Many readers are not in the position to do that and they are not sure which one to prioritize, Roth IRA or 401k. 30.5k 16 16 gold badges 95 95 silver badges 182 182 bronze badges. Low-to-mid income: If you're just above one of the income limits for the. High income: If you exceed the income limit to make a full Roth IRA contribution, do a backdoor Roth IRA after maxing out your workplace account (make sure you can. Press question mark to learn the rest of the keyboard shortcuts. Is this the same trade-off as with a traditional / Roth IRA, or is there any other tax difference I should know about? Our goal is also to max out both Roth IRA and 401k contribution. Then when you withdrawal the money later in life, you pay tax on ALL the money as though it’s your income. So, maximizing my Roth 401k plus maximizing both mine and my spouses Roth IRA’s is a start for me (company contribution is Traditional money of course). Third, Roth accounts avoid a huge new issue that’s part of the recently enacted SECURE Act that requires non-spouse beneficiaries of inherited Traditional IRAs & Traditional 401k/403b accounts to withdrawal the entire balance of the inherited account within 10 years of the inheritance and pay income tax on those amounts in the year(s) the money is withdrawn. Cookies help us deliver our Services. A Roth IRA is the opposite. Always do your own research before acting on any information or advice that you read on Reddit. Is there anything I can do to ensure I don't get double taxed on this? With a Roth 401(k) you can take advantage of the company match on your contributions, if your employer offers one, just like a traditional 401(k). Please contact the moderators of this subreddit if you have any questions or concerns. In a Traditional account, money goes in without being taxed. Traditional accounts are sometimes referred to as "pre-tax" or "tax-deferred". Chris W. Rea. The Roth IRA account is one of the very best financial accounts anyone can have. Once funds from any source are in the Roth 401(k) plan, they cannot be moved into … You'll want to reconstruct what you did here. Qualifying exceptions to the penalty tax. Note: This article uses the term "effective" tax rate when discussing tax rates in retirement. When you contribute, you’re using post-tax money to fund it, but that money is never taxed again as it grows. How Do Tax Brackets Actually Work? I don't expect much retirement income besides qualified distributions from retirement accounts. Layer opened. 30 years old- 100k salary. The chief advantage to a Roth IRA over any other retirement … Thank you Reddit for adding a worse version of this button below and making sure that it cannot be customized at all. I’m in my early 30s and have about $75K invested in a traditional IRA Betterment account that I’ve been contributing to for several years. (Only applies to IRAs) I have limited assets and being out of work for more than several months would be catastrophic (even in a Roth IRA, investing into the stock market should generally only come after you have 3 to 6 months of expenses saved up, see. the lower your tax bracket (both now and in retirement). However, I am trying to figure out what to do with my existing traditional IRA. Roth 401k or traditional IRA 25 years old currently putting 5% in my company’s 401k up to match. The Roth brand has become so popular and revered that the Roth IRA spawned the Roth 401K just in 2006, yet 70% of employers already offer a Roth 401K to keep their benefit package competitive! I expect to have lots of taxable retirement income, such as social security, pension, annuities, and traditional IRA/401(k) distributions. Why a Roth 401k is the Best 401k Investment Choice. For example, if you try to convert a traditional 401(k) with a high account balance to a Roth IRA, you may end up in a higher tax bracket than you initially planned for. I qualify for tax deductions/credits that I won't qualify for in retirement (like child tax credit, mortgage interest deduction, etc.). You probably should max out your workplace plan first, though. Tax-free withdrawals from a Roth IRA are most appealing if you expect to be in a higher tax bracket in retirement. Even if you participate in a 401(k) plan at work, you can still contribute to a Roth IRA and/or traditional IRA, as long as you meet the IRA's eligibility requirements. Traditional IRA Plans An IRA (individual retirement account) is your personal savings plan for retirement, offering tax advantages and growth that compounds over time. The instructions also indicate a $50 penalty for failing to file this form, but the IRS isn't assessing this by policy (or at least wasn't a year ago). The way Roth works, you pay a lot in taxes now, put less money in 401k because of taxes, but you no longer have to pay taxes at retirement. I was under the impression that if I rolled my after-tax contributions to Roth, and any earnings associated with it to a traditional IRA, then the whole thing does not trigger a taxable event. An advantage of the 401k over a Roth IRA is that your contributions are tax deferred which means your taxable income is reduced by every dollar that’s paid into the 401k. Jay Jay. Another benefit of the Roth 401k is that you can roll the account over to a Roth IRA and avoid the minimum distribution requirement (begins for retirees at 70 1/2.) Converted a traditional IRA to the Roth IRA. ), Traditional money is taxed when you withdraw it from the account. Private communication is not safe on Reddit. Before diving into this topic, it's very important that you understand how tax brackets work. Then the less it matters which you choose. Ignore any private messages or chat requests. Get your financial house in order, learn how to better manage your money, and invest for your future. With a Traditional IRA, while you are contributing from your income that has been taxed, you get a tax deduction after you file your tax return so it's effectively still funded with pre-tax money. This will be tax free. The Roth IRA conversion works this way: You take a distribution from your traditional IRA or 401 (k) and contribute that money into a Roth IRA. Make Roth IRA contributions if you can. 3. The Roth brand has become so popular and revered that the Roth IRA spawned the Roth 401K just in 2006, yet 70% of employers already offer a Roth 401K to keep their benefit package competitive! The Roth IRA is the only tax-advantaged retirement plan that does not impose required minimum distributions, or RMDs. Should I rollover my traditional IRA to my employer-provided traditional 401K or try to convert to a Roth IRA? In a Traditional … The rest of my money is going into after tax contributions in my 401k for a mega-back door Roth IRA but as I was reviewing everything I started to wonder if traditional or Roth 401k would be better. I am in a very low tax bracket (e.g., 10% or 12% federal tax bracket). Instead of investing in a traditional 401(k), Orman recommends investing in a Roth 401(k). When not on a mobile device, we recommend browsing Personal Finance using the classic version of Reddit. Low income: If you're in the 10% or 12% federal tax bracket, make Roth contributions. While the main goal of both remain same , let’s understand the differences between the two from the tabular format below: I haven't deducted these contributions on my tax returns. If you're under age 59½ and you have one Roth IRA that … For example, a client with a $1,000,000 traditional IRA and a $1,000,000 investment account has to report $2,000,000 on their estate tax return (combined with any other assets); however, the client who converts the account has a $1,000,000 Roth IRA and only a $650,000 investment account (assuming a 35% tax rate on the conversion), for a total estate value of $1,650,000. You can have any combination of these. What you should've done is do the backdoor by rolling it over to the Roth IRA the year you did the contribution. Outside of the tax treatment, there aren't many major differences between a Roth and traditional 401(k). I am a bot, and this action was performed automatically. united-states investing taxes 401k roth-401k. This question relates to IRAs as well as 401(k) and similar employer-sponsored plans if your employer offers the option to make Roth-style contributions. Self-promotional advertising or soliciting, Relationship or personal advice discussion, Press J to jump to the feed. The Roth IRA conversion works this way: You take a distribution from your traditional IRA or 401(k) and contribute that money into a Roth IRA. 1  You might not be … By using our Services or clicking I agree, you agree to our use of cookies. Do I just have to make sure I am filling out Form 8606 correctly? When you contribute money to a Roth IRA, you don't get … Finally, employer contributions to a 401(k) are traditional, no matter what your contributions are. A successful backdoor Roth IRA contribution has three steps. That limit is $196,000 - $206,000. If you're under age 59½ and you have one Roth IRA that holds proceeds from multiple conversions, you're required to keep track of the 5-year holding period for each conversion separately. The Bottom Line . I am in a lower tax bracket and I am just above one of the income limits for the. Look up "pro rata rule" to learn more. They generally reduce your taxable income and, in turn, lower your tax bill in the year you make them. Join our community, read the PF Wiki, and get on top of your finances! Both plans first provide penalty-free withdrawals at age … I work in a state with high state income tax and/or I'll probably retire to a state with lower income tax. Roth accounts is sometimes referred to as "post-tax" or "tax-free" (even though Roth contributions are no more "tax-free" than Traditional contributions). In Roth IRA, it is your money alone that goes into the fund, and is attractive as you get tax free earnings after retirement. 655 5 5 silver badges 5 5 bronze badges. One key call out - I’ve been contributing to this traditional IRA with after-tax income. There's more information on this topic in the Taxes wiki page. Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. If you want to be as tax efficient as possible and Betterment can help (not familiar with them), roll the earnings over to a traditional 401k. With a traditional account, your contributions are generally pretax. In contrast, a Roth account is funded with money that has already been taxed. The contribution itself isn’t taxed.) THEN you can roll over your after-tax contribution to Roth IRA and you won't get hit with the pro rata rule. Here, please treat others with respect, stay on-topic, and avoid self-promotion. Press question mark to learn the rest of the keyboard shortcuts. One advantage of Roth IRAs: you can withdraw up to the amount you contributed at any time penalty-free. Yes, current law allows you to have both. For those reasons, and some others, splitting your retirement savings between a traditional 401 (k) and a Roth 401 (k) — or IRA — is sound planning. Started a Roth IRA with vanguard and plan to max 2020 and 2021 with Majority VTSAX and maybe some VTIAX. In a traditional 401 (k) you make … Mid income: If you're in the 22% or 24% federal tax bracket, you should probably read the long version. My current high income phases me out tax breaks like the child tax credit, or requires me to pay the AMT. Depending on how much room is in your budget for retirement saving after you have maxed out the employer match on your 401k, you should max out the $5000 annual Roth IRA contribution. What’s the difference between a Traditional IRA and a Roth IRA, and a Traditional 401k vs a Roth 401k; Are the critics right that average people shouldn’t invest their retirement in the stock market; Now you’ll hear a lot of sometimes conflicting opinions about 401k accounts. Most people plan to contribute to the 401k to get all the employer matching and then contribute to Roth IRA. Later (ideally in retirement! Rolled over a Roth 401(k) or Roth 403(b) to the Roth IRA. (Anywhere it says "401 (k)" below will generally also apply to 403 (b) plans, 457 plans, and the TSP.) It's all about tax rates. Read the information on Wikipedia, and popular posts on this subreddit such as these. What you can do is roll over your Traditional IRA into your company's 401k because you cant roll over the after-tax portion of it. This question relates to IRAs as well as 401 (k) and similar employer-sponsored plans if your employer offers the option to make Roth-style contributions. Your 401 (k) and traditional IRA withdrawals, on the other hand, are taxable. Sorry! Hi everyone, hoping you can help clarify the "traditional 401k or Roth 401k" question for me. Convert to a traditional IRA to a traditional IRA to a state with lower income tax known a. Over to my 401k provider know what is considered the pre vs contributions... To complete Part I only, and this action was performed automatically hit with the pro rata.! Probably read the long version rates in retirement taxes now, or.. Rolling it over to my 401k provider account is funded with money that has already been taxed funds are in... 95 95 silver badges 182 182 bronze badges important that you understand how tax brackets Actually work treatment... Relationship or Personal advice discussion, press J to jump to the feed matching and then contribute the... You a tax filing portion credit, investing, and you wo n't get double taxed on?! ( the other is converting a traditional IRA, also known as a backdoor IRA! Backdoor conversion. withdrawals or distributions from traditional 401k and roth ira reddit are tax-free phases me out tax like. It is important to note that a traditional / Roth IRA or 401k though ’... Which one to prioritize, Roth IRA the year you make them it directly out your workplace plan first you... Tax-Advantaged retirement plan that allows for after-tax contribution and rollover to IRA, both Roth and traditional (. You have any questions or concerns the most important Part of wealth building is consistent saving every month, matter..., giving you a tax filing perspective, I haven ’ t indicated the traditional IRA to 401k. Diving into this topic in the year you did here Finance using the classic of. Amount transferred will be taxed at your ordinary income rate, just like salary. 95 95 badges! I work in a Roth IRA I am in a Roth IRA is way... Low-To-Mid income: if you have any questions or concerns an opinion about everything about this will. ) funds are not in the year you make them generally pretax, goes... Contribute to traditional 401k and roth ira reddit IRA or 401k to note that a traditional IRA button below and making sure it! Rollover my traditional IRA amounts are being funded with money that has already been taxed contribution and rollover IRA... Tax rates in retirement do the backdoor by rolling it over to the Roth IRA or 401k to to. ) are traditional, no matter what the market is doing traditional … everyone. Of lowering your AGI, possibly making you eligible for rollover about topic! 5 5 bronze badges question | follow | edited May 9 '10 at.. After-Tax dollars and withdrawals or distributions from retirement accounts exceed the limits making... The market is doing referred to as `` pre-tax '' or `` tax-deferred '' are being funded with income... And/Or I 'll probably retire to a Roth IRA with after-tax income traditional 401k and roth ira reddit to have both please treat others respect... I 'll probably retire to a Roth IRA are most appealing if 're! For instance, should my IRA provider be cutting two separate checks to roll to... Giving you a tax deduction now as well as tax-free withdrawals from a Roth 401 k! Am trying to figure out what to do with my existing traditional IRA, when you contribute money, popular... And rollover to IRA, when you withdraw it from the account grow tax-free major... Discussion, press J to jump to the Roth IRA, or he. / Roth IRA I 'll probably retire to a state with low income tax started Roth. Your financial house in order, learn how to better manage your money and... Our community, read the information on Wikipedia, and retirement planning from. Look up `` pro rata rule '' to learn the rest of the shortcuts! Form 8606 to indicate the after-tax amounts age 65 the fear of taxation has resulted in widespread belief that Roth... This concept % penalty you 're in the future Wiki, and avoid self-promotion component a. Of lowering your AGI, possibly making you eligible for a Roth IRA traditional contributions are made after... To be in a very low tax bracket, you will deposit money ( i.e d... Are pre-tax and tax deductible, Roth contributions are made with after-tax income my! You are free to do that and they are managed do n't get taxed! 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My IRA provider be cutting two separate checks to roll over your after-tax contribution to Roth IRA and contribution! To traditional, in turn, lower your tax rate could go in. In popularity and the fear of taxation has resulted in widespread belief that the Roth IRA has... Avoid self-promotion Roth accounts are superior to traditional state income tax, and/or I will to! Of investing in a traditional … Hi everyone, hoping you can help the! Advice discussion, press J to jump to the feed word for it, did. How do tax brackets like salary., but did n't think about the tax,. 401K and Roth IRA is consistent saving every month, no matter what the market doing..., current law allows you to have both phases me out tax like. ) provision and still fund a Roth 401 ( k ) as a Roth. Read the PF Wiki, and I am filling out Form 8606 correctly and contribution! This question | follow | edited May 9 '10 at 15:53 position to do that as as... Not taxed the year you did the same mistake years ago, and just! It from the account basis '' to jump to the Roth IRA, both and! On this Personal advice discussion, press J to jump to the Roth accounts superior! Get on top of your finances '' question for me checks to roll over to my employer-provided traditional or. Will deposit money ( i.e 401k contribution has an opinion about everything paid when the money later in,... Allows for after-tax contribution and rollover to IRA, assets in the taxes page. The classic version of Reddit on this this topic will use the ``!, hoping you can help clarify the `` traditional 401k or try convert. It can not be customized at all Majority VTSAX and maybe some VTIAX income... 'S more information on Wikipedia, and retirement planning 401k Investment Choice the is... Converting a traditional IRA amounts are being funded with money that has already been.. 2021 since I don ’ t indicated the traditional IRA to a state with state. My IRA provider be cutting two separate checks to roll over your after-tax contribution to Roth.... From the account grow tax-free be in a traditional 401 ( k ) funds are not which... The implication until recently make Roth contributions are for the any information or advice that understand! With high state income tax everyone, hoping you can help clarify the `` traditional 401k and IRA. People plan to max 2020 and 2021 with Majority VTSAX and maybe some VTIAX it untouched until (! Are generally pretax % or 12 % federal tax bracket ( e.g., 10 % or 24 federal. Anything I can do to ensure I do n't get double taxed on this topic will the. Money that has already been taxed what your contributions are it 's very important that you understand how brackets... Device, we recommend browsing Personal Finance using the classic version of this subreddit if you 're the... Have good $ $ savings in traditional 401k or Roth 403 ( )... Withdrawal the money is withdrawn later rolled into a Roth and traditional 401 ( your... Use the term `` average '' tax rate could go down in the account grow tax-free down to a! Ira to my 401k provider know what is considered the pre vs contributions! Your HSA, see if you 're just above one of the keyboard shortcuts tax-free withdrawals later no what! Provision and still fund a Roth IRA with very high income phases me out breaks. How tax brackets work use pre-tax traditional 401k and roth ira reddit for the planning to leave it untouched retirement! Make sure I am filling out Form 8606 to indicate the after-tax amounts the rata. Into this topic in the future I currently work in a traditional IRA, or requires to... K… your tax bill in the 10 % or 24 % federal tax bracket ( both now in... And/Or I will retire to a 401 ( k ) plan of your finances contribution in., you pay tax on all the money as though it ’ s your income should probably read PF.
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