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Author: mstrlucky74 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75525  
Subject: ROTH 401K Now Offered Date: 10/18/2013 8:09 PM
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I am 39 years old. My company just sent out letter saying they are offering contributions to a Roth401k now. I am already contributing to the regular 401K but I am thinking of splitting my future contributions 50/50 between the two. Is that wise? Thanks.
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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73606 of 75525
Subject: Re: ROTH 401K Now Offered Date: 10/18/2013 10:47 PM
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Roth contributions are after tax but distributions in retirement are tax free.

Contributions to a regular 401k are pretax, but distributions are taxable at ordinary income tax rates in retirement.

If the tax rate now and in retirement are the same, the two are mathematically identical. Roth is better if your tax rate is low now, but likely to be higher in retirement. Regular 401k is better if your tax rate is high now but expected to be low in retirement.

Of course if your 401k investments grow nicely over the years, you would rather they be in the Roth.

Either way can work for you. But increasing your contributions is the best way to plan for retirement.

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73612 of 75525
Subject: Re: ROTH 401K Now Offered Date: 10/19/2013 1:48 PM
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But increasing your contributions is the best way to plan for retirement.

Unless the government gets its greedy mitts on the trillions in Americans' retirement accounts.

The Government Generously Offers To Help You "Manage” Your Retirement Account
http://www.zerohedge.com/news/2013-02-02/government-generous...

From Bloomberg:

The U.S. Consumer Financial Protection Bureau is weighing whether it should take on a role in helping Americans manage the $19.4 trillion they have put into retirement savings, a move that would be the agency’s first foray into consumer investments.

That’s one of the things we’ve been exploring and are interested in in terms of whether and what authority we have,” bureau director Richard Cordray said in an interview. He didn’t provide additional details.

The bureau’s core concern is that many Americans, notably those from the retiring Baby Boom generation, may fall prey to financial scams, according to three people briefed on the CFPB’s deliberations who asked not to be named because the matter is still under discussion.

The Securities and Exchange Commission and the Department of Labor are the main regulators of U.S. retirement savings vehicles and funds. However, the consumer bureau — established by the 2010 Dodd-Frank Act — sees itself as a potential catalyst for promoting a coherent policy across the government, the people said.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73616 of 75525
Subject: Re: ROTH 401K Now Offered Date: 10/19/2013 6:23 PM
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I think we all recognize the need to do something as more people become dependent on their 401ks and IRAs for retirement and to many are sheep to be shorn in the financial community when they seek advice.

Perhaps govt standards are coming. Or perhaps employers will be liable for poor choices in their plans.

Either way, once you develop the saving discipline, you can easily direct your savings to your own taxable account if that becomes appropriate.

But I wonder how far govt controls will go. I would expect lots of resistance. And you have to wonder if the administrative lawyers who tend to run govt programs will be willing to take risks or if they will turn out to be ultra risk averse.

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Author: MurrayS Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73620 of 75525
Subject: Re: ROTH 401K Now Offered Date: 10/20/2013 11:11 AM
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It is wise to have some Roth, though with our current tiered tax system, it's fairly likely that you will pay less than 25% in taxes on IRA withdrawals if you have little other retirement income as I do.

If your current marginal tax rate is 15% or lower, I'd go all Roth. If your current marginal tax rate is 25% or higher, I'd go some Roth and some traditional.

-murray

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Author: jds47 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73681 of 75525
Subject: Re: ROTH 401K Now Offered Date: 11/3/2013 5:09 AM
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Another difference is that your 401k will be subject to mandatory withdrawals - about 3 pct per year I believe - when you become 70.5 years old. The Roth does not have mandatory withdrawals. These have tax consequences - the non-Roth withdrawals are taxed at that time.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73682 of 75525
Subject: Re: ROTH 401K Now Offered Date: 11/3/2013 11:29 AM
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Another difference is that your 401k will be subject to mandatory withdrawals - about 3 pct per year I believe - when you become 70.5 years old. The Roth does not have mandatory withdrawals. These have tax consequences - the non-Roth withdrawals are taxed at that time.

Sorry - you need to be more specific than just 'Roth' and '401(k)' when talking about RMDs (Required Minimum Distributions) at 70 1/2, because Roth 401(k)s DO require RMDs.

Roth IRA - no RMD required, no taxes due on withdrawal (assuming all other rules met)
Roth 401(k) - RMD required at 70 1/2, no taxes due on withdrawal (assuming all other rules met)
Traditional IRA - RMD required at 70 1/2, taxed at your marginal rate
Traditional 401(k) - RMD required at 70 1/2, taxed at your marginal rate

Inherited accounts have different RMD rules

Rules for 401(k) RMDs can be found in IRS Pub 575 http://www.irs.gov/pub/irs-pdf/p575.pdf

Rules for IRA RMDs can be found in IRS pub 590 http://www.irs.gov/pub/irs-pdf/p590.pdf

The required amount for RMDs is based on life expectancy tables published in IRS pub 590 with several examples on how to calculate. For many people, the initial RMD would start at about 3.7% of the account balance (increasing from there) but the tables, and maybe the rules, are likely to change between now and when the OP hits 70 1/2

AJ

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