If you don't know how to do a "back door Roth IRA" google it and do it.

No income limits, but the money you put in is after tax.

This is another good way to put away money that you can collect tax free when you retire.

If tax reform legislation goes through this option might go away, as it is a good deal for "people who don't pay their fare share".

 

Busdriver thanks for the input and I agree with what you said. I guess the only dilemma will be for down the road when I'm in a much higher tax bracket. Get the tax benefit now with traditional option or later with Roth option.

 

I guess it's a good problem to be in a high tax bracket, but I'm going for the Roth regardless. Have some extra money to pay higher income taxes right now, and I figure that the Roth will be the very last thing to tap into. I doubt the Roth will be offered in the future.

 

So far this has been the best calculator I've found. https://www.calcxml.com/do/ret10 But I cannot factor in the "gap" between retirement and withdrawal.

Option 2 seems like the most correct option to use. Big assumption we are going to add in the $8000 tax savings back into the account as after tax savings. If you are thinking about comparing $24,000 in Roth and $24000 in 401k with no after tax, then there is no real comparison. They will grow the same rate but you did nothing with the money saved from taxes.

But assuming we do everything correctly. Ie, save the max, it looks like the roth makes sense as long as you can afford the extra tax to max out the 24000 (catch up). Even if you are 55 and plan to withdraw starting at 60. I just want to make sure I'm calculating the numbers correctly.

If you assume the tax rates stay the same (all we can plan for), then anyone with 25 years here will be in the 28% bracket best case. We are not going to get a big windfall in tax saving after we retire. The Roth will allow some flexibility in not having mandatory withdrawal and we can always draw first from our previously accumulated 401k. I don't see the advantage of converting, unless I have lots of time left here, which I don't.

 

So I may have missed it how do we open the roth 401k?

 

So, first I got a flyer today from Vanguard telling us to re-elect our beneficiaries, and I went through that.

As far as funding the Roth, I went on the account to the Vanguard home page. Then to "manage my money", then "change my paycheck deduction". There is an option there to select your deduction to go to the Roth, or the Roth catchup. I'm assuming that must be it.

 

If you are on the Captain pay scale or even a top end F/O, every calculator that I have looked at tells me Roth 401(k) is not a good deal. Same for the conversion.

My situation tells me I have to pay over $80k in taxes now and with 15 years to go I don't make up the difference. Also with being in the tax bracket that we are, it's better to take the $18k investment pre tax.

Anyone else see something different, am I missing something?

Meeting scheduled with financial advisor on Tuesday.

 

On Captain pay scale, any thoughts on ROTH 401(k) for the benefit of its rules on not having a required minimum distribution at 70 1/2--if one already has a substantial pre-tax 401(k)?

 

Roth 401K's do have an RMD. In order to avoid it, it has to be converted to a Roth IRA. The para. below is from the IRS.gov site.

What types of retirement plans require minimum distributions?

The RMD rules apply to all employer sponsored retirement plans, including
profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs.

The RMD rules also apply to Roth 401(k) accounts. However, the RMD rules do not apply to Roth IRAs while the owner is alive.

 

So, I have been putting in 5% after tax for years.

Supposedly, Vanguard knows how much money this is, as it has been mixed with my 401k pre-tax.

Is there any way to convert the after tax money to a Roth IRA?