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I'm stewing over what do next year for deferred compensation and I'm interested in the opinion of the cloud. Where should I put my $18.5k in 2018? Roth or traditional 401k?
some background:
~30 years from expected retirement.
emergency fund: yes
debt: roughly 500k mortgage at 4.0% fixed. planning to stay in this home until retirement if not beyond
student loans: 30k at 3.2% variable.
life/disability insurance: yes
portfolio: roughly 100k with 95%/5% stocks/bonds.
current retirement assets are 90% post-tax (HSA, IRA and 401k) and 10% pre-tax (traditional 401k)
tax situation: married filling jointly, one income. Expect to be in the 32% federal bracket this year, maybe next year could hit the 35% bracket. Don't think I'll ever hit the 37% bracket. State income taxes @ 4.5%. I don't know what my retirement tax bracket will be... My income will be less for sure but taxes could be much higher...
Going forward will continue to do 11k per year into backdoor Roth. Will get 36.5k per year in tax deferred 401k from employer via profit sharing. I need to figure out whether the 18.5k I can put into 401k should be pre- or post-tax. Maybe it doesn't matter that much. In 2017 I put all 18k into Roth and I was previously planning on switching to traditional in 2018. The new tax cuts have me rethinking that plan.
Will the Trump tax cuts expire in 8 years as currently scheduled or be made permanent in the future (or repealed and replaced with much higher marginal rates in 3 years with a Democrat controlled congress and white house)? Will a long period (~30 years) of tax free growth and compounding in the Roth overcome the upfront loss to taxes? Does it change the math if I decide to retire early with a lower cost of living/lower income?
I'll likely always have a mix of pre and post tax retirement contibutions I'm just thinking about how to maximize returns and minimize tax drag...
Any wisdom from the group?
some background:
~30 years from expected retirement.
emergency fund: yes
debt: roughly 500k mortgage at 4.0% fixed. planning to stay in this home until retirement if not beyond
student loans: 30k at 3.2% variable.
life/disability insurance: yes
portfolio: roughly 100k with 95%/5% stocks/bonds.
current retirement assets are 90% post-tax (HSA, IRA and 401k) and 10% pre-tax (traditional 401k)
tax situation: married filling jointly, one income. Expect to be in the 32% federal bracket this year, maybe next year could hit the 35% bracket. Don't think I'll ever hit the 37% bracket. State income taxes @ 4.5%. I don't know what my retirement tax bracket will be... My income will be less for sure but taxes could be much higher...
Going forward will continue to do 11k per year into backdoor Roth. Will get 36.5k per year in tax deferred 401k from employer via profit sharing. I need to figure out whether the 18.5k I can put into 401k should be pre- or post-tax. Maybe it doesn't matter that much. In 2017 I put all 18k into Roth and I was previously planning on switching to traditional in 2018. The new tax cuts have me rethinking that plan.
Will the Trump tax cuts expire in 8 years as currently scheduled or be made permanent in the future (or repealed and replaced with much higher marginal rates in 3 years with a Democrat controlled congress and white house)? Will a long period (~30 years) of tax free growth and compounding in the Roth overcome the upfront loss to taxes? Does it change the math if I decide to retire early with a lower cost of living/lower income?
I'll likely always have a mix of pre and post tax retirement contibutions I'm just thinking about how to maximize returns and minimize tax drag...
Any wisdom from the group?
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