401k vs Roth IRA…Which is better?

#TheLoanOfficerPodcast #TLOP #401k

[Biggerstaff]

I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement in 3 years.

[aprilvancleve]

If your employer matches contributions I would max out that matching amount in the 401k, then max out your Roth IRA. Free money plus tax free money = winning with grey hairs!

[alexanderhann]

Literally just max out your 401k every year at 24k and max out your Roth IRA every year at 7k and you will be a multimillionaire by the time you’re 65.

[LordKalerran]

There’s a Roth 401k too

The main difference between the IRA and the 401k is that the former is an individual (hence the I) and the 401k is employer sponsored.

[colechaffin]

The Roth is the best if you think you’ll be making more money by the time you retire than right now. If you think you’re at the peak of your career in terms of income then the traditional IRA/401k is the best option to reduce taxable income

[daquan]

Receiving higher income start with 401k then rollover to Roth IRA, problem solved

[adamt]

So if someone lives in a high income tax state, like California, isn't 401k better if they plan to move to a lower income tax state in the future?

[Yowhatisupp]

But you have to pay a 10% penalty, which is then worse before a certain age.

[xtqkytk]

Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My parents both spent same number of years in the civil service, but my mom was investing through a wealth manager, and my dad through the 401k.

[Pueblito]

But a 401k is growing faster because you are investing a greater amount of money b/c it's tax deferred.

[tygaz]

What about the argument that if you left it in a 401(k) it will grow much larger since it's pre-tax money than in a Roth IRA, which is already post tax money?

[krislimpus]

Just to add a point.. taxes rates aren’t going down. If you look at the trend line of taxation over the history of country adjusted for inflation you’re gonna get taxed heavier when you go to retire now.

If your company matches definitely take the free money but ROTH is way better. Pay the tax now instead of an almost certainty of paying higher taxes later

[evolutonkng]

We always get taxed on everything even our own money shi is annoying

[lukeskywalker]

Not necessarily. You will be making less money when you retire. I you pull out a little a time you could wind up paying no tax.

[Jasch]

What would be the difference if you roll your 401k into a Roth?

[chief]

But how much tax do I pay on my Roth IRA contributions?

I can’t find that info online.

[tadrod]

are you allowed to rollover your 401 to a roth ira? or is it 401 to traditional ira 1st then finally roll it over to a roth ira.

[snowgurl]

But you still have to pay 10% early withdrawal penalty if you are not 59 1/2

[JenBeyond]

So is it smart to roll a 401k over into a Roth ITA?

[TimothyL]

Why does tax-free growth matter? If I'm in the 22% tax bracket, I can either contribute $100 in a 401k or contribute $78 in a Roth IRA and pay $22 in taxes. If my investments grow 10x, I'd end up with $1, 000 in my 401k or $780 in my Roth IRA. With the 401k, I'd have to pay $220 in taxes, but I'd still end up with $780.