I’m in my mid 20s and currently have almost $11k in my 401k through my employer all traditional.. I recently learned about the Roth 401k plan and wondering which would be better for me?
I currently make $85k annually and the 401k has a 4% match.
From my understand traditional 401k are for people who already have a high income and are in the higher tax brackets like 32% or more.. is this correct? Roth 401ks are for people who make less or are in the lower tax brackets and/or expect to make more in retirement.
Don’t get me wrong I think $85k is a lot but apparently everyone means a lot more when they talk about a high income. I’m currently doing 10% of my income and i’m young and just want to know what is best.
Also curious if I should transfer that traditional balance over to roth? Yes, I know that means I will pay more in taxes next year.
TLDR: 1) Is roth or traditional better for my situation? make $85k, mid 20s, currently $11k in 401k with a 4% company match 2) Should I transfer the traditional balance over to Roth?
Finally if I do switch to Roth can someone please explain what the actually percentage I should be saving? I know everyone says 10-15% or even more but they also say that’s pretax income? If I switch to a Roth 401k my only pretax contributions will be my HSA.
I just got my pay raise and uped my 401k contributions so I don’t have my exact numbers but this is what I was doing prior…
- 15% pre-tax (401k & HSA)
- 10% post-tax (Roth IRA)
- 2% savings
Obviously those numbers will change if I start doing Roth contributions to the 401k so is $4k (HSA contribution limit) enough pretax since everything else will be post tax / roth?
original posted by anglerclaim to r/personalfinance on Sat, 02 Mar 2024 13:46:49 GMT.