Roth or Reg 401K

[ozjulian]

What would be more beneficial in the end? I'm familiar with it's difference and clinging more towards the reg kind but the Roth makes more sense in end. Thoughts? Please.

[compassion101]

How old are you? Annual income? Married, kids? Anticipated future salary?

[Kenny]

Roth gives you peace of mind that you won't have to worry about the tax rates of the future. You never know what your earning potential is. Roth all the way, to me.

[ozjulian]

24, 50K not including bonus and OT pay, no and no, hoping to break 6 figures by 30 or increase of 5K annually.

[heyitsyeh]

The way taxes are going, it's not simply a matter of which bracket you will be when you retire, rates are guaranteed to go up for every level by the time you retire so it is in your best interest to fund Roth accounts as much as possible. I would recommend Roth 401k if your employer has stock options with fantastic returns (>8%) or the ability to invest outside company stocks; if not, then Roth IRA. If you are looking to diversify/hedge your assets with a pre-tax retirement account, consider opening an HSA.

[ozjulian]

Placed 5% on Roth and 1% on regular for now. The 1% was more of a pittance move towards the reg 401K. employers matches up to 4%. HSA- I'm not really familiar on its benefits per se. Anyone care to explain? Thank you!

[Revelate]

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@ozjulian wrote:
Placed 5% on Roth and 1% on regular for now. The 1% was more of a pittance move towards the reg 401K. employers matches up to 4%. HSA- I'm not really familiar on its benefits per se. Anyone care to explain? Thank you!

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Always contribute up to what your employer will match in the employer sponsored savings plan: that takes precedence over Roth vs. traditional.

[heyitsyeh]

Good plan, getting all the employer match. Most employers match into traditional 401k even if you contribute Roth, so you don't have to worry about diversification there.

HSAs are savings accounts often paired with high-deductible, low premium healthcare plans that can be used tax-free for any medical expenses you have to pay out of pocket. You usually put in a set amount of pretax dollars from your paycheck just like you do with your 401k. Much like an IRA, these funds will: stay with you even if you change companies, have an annual contribution limit, can be withdrawn for non-medical uses at retirement age with no penalty, and can (read: should) be invested into anything on the market (funds,stocks, bonds, etc). It is a fantastic account for your age because assuming that you are young and healthy, paying high health insurance premiums is a waste of money since you won't be using it much; meanwhile the money you are stashing in the HSA will continue to grow and be used as needed. The tax-free benefit for medical expenses is icing on the cake for what is essentially a second IRA, giving you a higher contribution limit. Definitely look into this for your company because they will most likely not advertise it; it has quite the reputation for countering the socialization of our health insurance (ie paying only for the services that we need, when we need it).

More info here:

http://www.dartmouth.edu/~hrs/pdfs/hsa_guide.pdf

[Revelate]

Thanks for the information regarding HSA's: contribution limits are low but given it's for defraying future rather than current health care costs it's not a bad option at all.  Didn't realize there was a difference between FSA vs. HSA in terms of not losing it at the end of the year... good to know.

[wa3more]

Roth. When you retire in 25 years or so, tax rates will be higher. No doubt.

Listen to Heyits advice