With catch up, I just signed up for 30k. Pay increase is not keeping up with limit increase.

Anonymous wrote:

Anonymous wrote:Fed here. What are the reasons to to Roth 401K vs Pretax?

The other option is to stay with your pre-tax 401k and invest the tax savings into a Roth IRA account (if applicable). If not, you can always backdoor $7k into a Roth IRA via IRA account. So you would still be diversifying your portfolio.

this is what we do (although the IRA limit is $6500 plus $1000 if you are 50 or more)

Anonymous wrote:Fed here. What are the reasons to to Roth 401K vs Pretax?

It's pay now vs pay later.

Regular 401K:
- Get tax reduction now, when you contribute (Amount contributed * (your marginal fed tax rate+your marginal state tax rate)).
- Con: You will have to pay prevailing tax rates on withdrawal (you could minimize it if you move to a low/no-tax state or to a state that does not tax retirement withdrawals)
- Con: you are forced to withdraw at a certain age (RMD)

Roth 401k:
- You higher taxes now (on the contribution).
- No forced withdrawal anytime (if you convert the Roth 401K to a Roth IRA)
- No tax on withdrawal.

Assign values to each of the above and find your sweet spot.

I am maxing out on a 100k salary on 2023, but my spouse is iffy about increasing contributions on 60k. It's a lot! We could do it this year, and I think we should because we got a late start, but it does mean there isn't space for other savings. For instance, we put FSA reimbursements and/or tax refunds into 529s, we don't have room in our regular monthly budget.

Anonymous wrote:Fed here. What are the reasons to to Roth 401K vs Pretax?

The other option is to stay with your pre-tax 401k and invest the tax savings into a Roth IRA account (if applicable). If not, you can always backdoor $7k into a Roth IRA via IRA account. So you would still be diversifying your portfolio.

The other nice thing about 401k Roth is that you can convert it to a Roth IRA and negate any RMDs and pass long the balance to your heirs (RMDs would apply).

Anonymous wrote:Fed here. What are the reasons to to Roth 401K vs Pretax?

If you fully commit to a roth tsp from the start of your career then all your contributions and gains will be tax free in retirement. The pretax can also lower your income enough to qualify for some income restricted benefits like directly contributing to a roth ira etc.

Anonymous wrote:Fed here. What are the reasons to to Roth 401K vs Pretax?

The reason would be if you expect your marginal tax rate in retirement to be higher than it is now. That is rarely the case, except in the case where you go from married filed jointly to single and keep roughly the same income.

Roth IRAs also don't have minimum distribution requirements, so it is easier to manage your taxable income (say you don't need a distribution and want to stay below an IRMAA threshold or something), although note that to take advantage of that as a Fed you'd need to roll your money out of TSP and into a Roth IRA because the Roth TSP isn't as flexible.

Anonymous wrote:Just got notice from our HR that the contribution limit to our 403b goes up to 22500 next year. I finally started to max out this year at 20500 and while yes it’s only 2000 more, I’m wondering at what point it’s too much going to retirement instead of more liquid investments/savings. For those of you maxing out are you increasing contributions for next year?

Are you hitting the ss max as well? If so, whenever that happens, increase your 401k contribution by that amount. You were doing fine the paycheck before when you had to pay ss so if you put it in your 401k, you won’t miss it

Fed here. What are the reasons to to Roth 401K vs Pretax?

I don't think it's ever too much.

Anonymous wrote:

Anonymous wrote:I am but sticking with pretax (had considered doing some Roth but decided maxing out pretax plus a backdoor IRA was plenty in retirement accounts)

I'm considering going 100% employer sponsored Roth 401k.

That would be a big commitment of funds to retirement for me (if I still maxed out)

Anonymous wrote:I am but sticking with pretax (had considered doing some Roth but decided maxing out pretax plus a backdoor IRA was plenty in retirement accounts)

I'm considering going 100% employer sponsored Roth 401k.

I am but sticking with pretax (had considered doing some Roth but decided maxing out pretax plus a backdoor IRA was plenty in retirement accounts)

If you have an adequate emergency fund then there is no reason to not max out tax advantage space if you can afford to do so.

Just got notice from our HR that the contribution limit to our 403b goes up to 22500 next year. I finally started to max out this year at 20500 and while yes it’s only 2000 more, I’m wondering at what point it’s too much going to retirement instead of more liquid investments/savings. For those of you maxing out are you increasing contributions for next year?