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OHSCrifle GRM+ Memberand SuperDork
1/17/21 10:53 a.m.
Driven5 said:

In reply to secretariata (Forum Supporter) :

You've got a lot going on there, and there's too much unknown at least for me to have much in the way of detailed opinions. However, I'd say that from what little I know of deferred compensation, I probably wouldn't start sticking anything in there until I had max'd every other tax advantaged account out first and still wanted to sock more away. As far as Roth vs Traditional, generally speaking, if the majority of my current retirement funds were in Traditional and I have Roth 401k available, I'd definitely bias my contributions towards (or even entirely) to Roth. Company contributions will always be Traditional still.

I have used TurboTax for the last 15 years. One house. Married filing jointly. Dirt simple tax return.

3 years ago my employer began to offer Roth 401k. I tried to do some calcs but found it rather inconclusive - so I arbitrarily decided to split my 401k contributions into regular and Roth401k, at 50/50. Lately I have been fortunate to be able to contribute the maximum allowed. 

In 2018 and 2019 I had to pay about $7k to the IRS when I filed my income taxes. This pissed me off because I followed the recommendations for deductions on dependants, etc. 

Last March I decided to hire an accountant to look at my Tax forms and tell me WTH. The accountant told me "you're in peak earning years- you need to defer income taxes for as much income as possible". Meaning into the traditional 401k instead of the Roth401k - so I I stopped funding the Roth 401k and put it back to 100% in regular 401k. Soon I will find out if the strategy helped with the surprise at tax time.

I greatly regret that saving and investing is a crap shoot to me. My main strategy has been to squirrel away as much savings as possible following the boglehead 3-fund plan - and don't touch it. This seems to be working pretty well after 26 years of 401k contributions.

AngryCorvair (Forum Supporter)
AngryCorvair (Forum Supporter) GRM+ Memberand MegaDork
1/17/21 11:03 a.m.

In reply to Driven5 :

One 529, two kids. Pacing myself. I know the money doesn't actually come from FAFSA, as FAFSA is the application process not the lender. It's just an easy way to say it.

Driven5 UltraDork
1/17/21 6:59 p.m.

In reply to OHSCrifle :

That's a good point I should have included in my response to secretariata. You have to do some estimating as to what you want your income to be in retirement. If you think you'll want, and be able, to have a similar income in retirement as your current income, Roth is probably the way to go. However, especially if your current income is significantly greater than you want, and are able, to have in retirement, then Traditional is probably the way to go... Especially if you're currently in the 32% or higher tax bracket.


In reply to AngryCorvair (Forum Supporter) :

Ok, good. Just checking. Apparently in addition to changing the calculations this year, they're also changing the terminology. For example the 'Expected Family Contribution' is becoming the 'Student Aid Index'. This is apparently in part because too many people thought that the numbers they saw on FAFSA were actuals.

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