I’m 24 years old and make $110K. The last two years I’ve been contributing to a Roth 401K and Roth IRA, and maxing both out.

For the 401K that ended up being $19.5K in 2021 and $20.5K in 2022. Both these contributions in these years were into Roth 401Ks.

However, going forward I see that the max is increasing to $22.5K in 2023. Does it make sense to continue contributing into a Roth or go into a traditional 401k instead? Especially given that I will contribute to a Roth IRA.

Apart from these, I also am saving for a house. A few thousand in extra savings by using the traditional would help, but my house savings would not really require this as I’m quickly reaching my goal of $100K for a down payment.

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AutoModerator t1_j2cb9tn wrote on December 31, 2022 at 4:40 AM

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Werewolfdad t1_j2cbmm9 wrote on December 31, 2022 at 4:43 AM

#1,212,437

Roth or traditional: https://www.reddit.com/r/personalfinance/wiki/rothortraditional and https://www.madfientist.com/traditional-ira-vs-roth-ira/

Some math: https://reddit.com/r/personalfinance/comments/z5hb8v/_/ixw89x5/?context=1

Left-Landscape-3890 t1_j2ccequ wrote on December 31, 2022 at 4:50 AM

#1,212,676

If you can afford to take the tax hit in the present then after tax and roth is for you. If taxes are kicking your ass then traditional pre tax is your jam. This country is in big trouble if you haven't noticed and God knows what taxes are gonna look like in 15-40 years when we're trying to retire. I'm playing the pay now play later by doing mostly roth and after tax. It would make me sick to give uncle sugar 20 ish percent of appreciated holdings so im eating it now. I can afford it based on how my income is taxed. Employer contributions are pretax. Spreading around to all 3 is likely best some might argue. You can use some portion of roth ira for first time home purchase

_Light_The_Way t1_j2cd35z wrote on December 31, 2022 at 4:56 AM

#1,212,886

I'm personally pro-traditional 401k. I use it to knock my taxable income into the next tax bracket.

StarVoyager96 t1_j2cd6c7 wrote on December 31, 2022 at 4:57 AM

#1,212,929

The only difference is whether you want to pay taxes now or later when you withdraw. In other words, if you anticipate your retirement tax rate to be higher than your current tax rate you should opt for roth and pay the lower tax rate now. If you think your tax rate will be lower in retirement you should take the tax break now and pay the lower rate later. But there’s other variables personal to you that may affect this decision as well.

deficitmonth t1_j2cdyqj wrote on December 31, 2022 at 5:04 AM

#1,213,164

Traditional is better for most people most of the time.

Unhappy-Lettuce-3987 t1_j2ch4cx wrote on December 31, 2022 at 5:34 AM

#1,214,063

I wish i had the roth option when i started an ira as im going to be in a higher tax bracket when i finally retire. The question you should ask is do you really think our government appetite for money will result in lower taxes in the future or higher taxes?

maedocc t1_j2cl2bk wrote on December 31, 2022 at 6:15 AM

#1,215,097

>I’m 24 years old and make $110K

Traditional makes sense for high income earners like you.

> A few thousand in extra savings by using the traditional would help, but my house savings would not really require this as I’m quickly reaching my goal of $100K for a down payment.

You can take the extra thousands in savings, toss it into a regular brokerage account and let it ride in VOO. More invested is always better.