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Traditional 401k vs Roth 401k?

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  • Traditional 401k vs Roth 401k?

    Wife is halfway done with residency and I just finished my first few months as an attending as a W2 in private practice.

    We both maxed out our Roth IRAs and we both maxed out Roth 401ks via our employers this year as our income is still relatively low (likely around 220k combined for 2017). I also converted my 401ks from residency to Roth this year which has us at around 50k combined in Roth IRA currently and around 30k in Roth 401k.

    My question is should we both continue Roth 401k for next year or switch to traditional pretax 401k? We are both around 30 years old.

    We will likely have a combined income of 400k and would like to take advantage of 36k tax deferred. The years following when my wife's residency is over it will be closer to 600-700k combined and we will obviously do traditional at that point, but wasn't sure about this year and next.

  • #2
    *Probably* traditional pretax 401(k) since you're in a high bracket (esp if you're in AMT and that sticks around in the pending tax bill). You may still choose to do Roth if you are minimizing future RMDs in retirement to keep a low bracket then.


    • #3
      Pre-tax. Also at your income for long enough it won't matter much either way. But yeah, pre-tax.


      • #4
        Thanks for the response. I forgot to mention that my wife also has access to a 457 which we will max out . Should we put all 54k in pretax to bring our taxable income down or diversify with some in Roth? Will also obviously be doing 11k into Roth IRA via backdoor.


        • #5
          Did you contribute $11k this year for 2017 in your Roth IRAs? If so, if your income is 220k you might not be able to do this.


          • #6
            I did backdoor contribution this year as I knew we'd be close to the cutoff.


            • #7
              WCICON24 EarlyBird
              If you do a 25 yr at full rates; you'll have $1.5M in today's dollars without any interest compound or earnings.

              You'll be fine no matter what you do with that income; really moving the deck chairs as far as income; I would recommend looking more at generational income/transfer than your own -- this is what is mentioned above with RMDs when you've got too much in the tax deferred space.

              Short term as you said - Roth until income really spikes