{"id":226,"date":"2023-11-03T13:39:47","date_gmt":"2023-11-03T13:39:47","guid":{"rendered":"https:\/\/pakstne.com\/blog\/were-in-our-mid-50s-and-have-2-million-in-our-401ks-should-we-focus-on-roths-contributions\/"},"modified":"2023-12-24T18:28:11","modified_gmt":"2023-12-24T18:28:11","slug":"were-in-our-mid-50s-and-have-2-million-in-our-401ks-should-we-focus-on-roths-contributions","status":"publish","type":"post","link":"https:\/\/pakstne.com\/blog\/were-in-our-mid-50s-and-have-2-million-in-our-401ks-should-we-focus-on-roths-contributions\/","title":{"rendered":"We’re in our mid 50’s and have $2 million in our 401(k)s. Should we focus on Roth’s contributions?"},"content":{"rendered":"
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\"Ask<\/a><\/div>\n<\/div>\n<\/div>\n

Ask a Consultant: We’re in our mid-50’s and have $2 million in our 401(k). Should we focus on Roth’s contributions?<\/figcaption><\/p>\n<\/figure>\n

We are a dual income couple in our mid 50’s with over $2 million in our 401(k)s. Should we “sacrifice” pre-tax benefits and switch to Roth contributions at work?<\/strong><\/p>\n

Wendy<\/strong><\/p>\n

Like most tax questions, the answer is “it depends.” Depending on your situation, contributions are converted into a file Roth 401(k)<\/a> It can make sense for several major reasons, including tax diversity and tax-free growth. However, there may be additional factors that make sticking with a traditional 401(k) and opening a Roth IRA on the side more desirable. You’ll also need to consider the tax impact of choosing between paying now versus paying later. Lots of factors and assumptions (such as future tax rates) go into these calculations, but it’s worth trying to figure out which path will save you the most in taxes over your lifetime.<\/p>\n

There is no direct, one-size-fits-all answer to this question, so it makes sense to discuss this with your financial consultant<\/a> or tax pro. They’ll have advanced modeling software that can help you see the different tax implications of sticking to a traditional 401(k) or switching to a Roth account. (And if you’re interested in working with a financial advisor, This tool can help you match with one<\/a>.)<\/p>\n

What is a Roth 401(k)?<\/strong><\/p>\n

More employers than ever before offer Roth 401(k) plans as part of their benefits packages. These hybrid accounts combine features Traditional 401(k) plans<\/a> And Roth IRA<\/a>, giving you the option to retire at work with special, tax-free growth benefits. However, these plans are yet to be discovered. Most of the money in employee retirement accounts is in traditional 401(k)s, mostly because people generally prefer the “pay less taxes for now” model.<\/p>\n

Unlike a regular 401(k), contributions to a Roth 401(k) will not reduce your current tax bill. These contributions are paid in after-tax dollars, so you’re paying taxes upfront for a significant interest in the future. The trade-off is tax-free growth, which means if you follow all the rules you won’t have to pay any tax on the profits inside the account when you withdraw them.<\/p>\n