Originally posted by Codie
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Originally posted by MossyRockRanch View PostOur kids work at the ranch throughout the year and log every job they do and we pay them for that . Money goes into there savings account then we transfer to the Roth . They even started asking about the returns this year and how we have invested it. They are learning the true value of work and savings which is really hard for most kids today.
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Originally posted by kenner27 View PostMy 401k is ROTH, I haven’t seen anyone directly refer to this. It’s the right choice correct? The company I work for matches nothing. Also, I believe maxing out a 401k is 18,600/year? If I were to get to max this out, I then need to open an IRA up and max it out too?
Roth 401k is dollars invested post tax. Conventional 401k is pre-tax dollars deferred comp before taxes. The difference is Roth 401k is not taxed coming out when you retire. The growth is tax free. A conventional 401k is taxed coming out for both your principal and growth. It’s taxed at your income tax bracket that year.
The thought behind Roth 401k is that tax brackets and rates are only going to go up with time due to our political climate. So go ahead and pay taxes now and save on the increased tax rates in years to come upon retirement.
It really depends on your income level and tax bracket now. High income earners would rather have a conventional 401k and defer the tax till later. They are already paying high taxes.
A Roth IRA is separate. It’s in addition to your Roth 401k. Max for a Roth IRA is $6k. It works similar to a Roth 41k in that it’s post tax savings plan and the growth is not taxed coming out upon retirement age
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