Comments on: Tax Diversification When Investing

By: John

John — Thu, 29 Oct 2009 02:06:40 +0000

I’m planning to inquire this year at the company retirement accounts meeting if any roth 401ks are in the works. Currently at age 29 I am putting enough into 401k to get the match and paying down debts that have potential to cost me alot.

Ultimately I want to have enough in tax-deferred accounts to at least fill out my tax-free income when I retire. There is always the option of converting to Roth in a recession when the account is worth less and so pay taxes on the reduced amount.

By: Rosa

Rosa — Wed, 28 Oct 2009 17:51:45 +0000

I can’t believe income or capital gains taxes are ever going to be lower than under the last Bush administration, so I favor the Roth – but in reality, with the annual limit on Roth contributions, what we do is “all of the above” – 401k (gotta get the employer match), Roth, and straight-up equity and bond investing.

I think I’d prioritize them in that order – 401k to at least maximize any match you can get, Roth to the annual limit, anything left over in a brokerage account.

By: Michael Harr @ TodayForward

Michael Harr @ TodayForward — Wed, 28 Oct 2009 17:27:48 +0000

Nice post and spot on with the tax diversification among account types. Generally speaking, it is safe to assume that if you have a modest projected retirement income that would land you in the lower tax brackets today (15% or less that is), you’ll be able to put more into the pre-tax 401k/403b/SIMPLE/SEP/457/etc. The closer you get to middle income brackets and above, the more valuable the Roth IRA becomes.

By: Craig

Craig — Wed, 28 Oct 2009 15:00:05 +0000

I like the Roth option for the reasons mentioned above. I expect to pay higher taxes in the future as should everyone cause they always are increasing. Also mentally you don’t have to worry about what % will be taken out down the road.