Standard vs Roth 401(k)

[krrish]

If this is ur first time full time job, young and married with kids, which 401(k) do you guys prefer/recommend?

[rmJU72]

Always standard 401k

[kran]

I prefer Standard. Assuming company match is 50% and overall tax % is 30%,

Standard lo, to get $500 company match, you have to contribute $1000 pre-tax, means you will get $700 less in your take home salary.

Roth lo, to get the same $500 match, your take home will be less by $1000.

Future lo if you withdraw from Standard 401k when you dont have any income, then you lose only 10% of the withdrawn amount as penalty, upto the withdrawal amount that equals the lowest slab after the standard deductions.

Roth lo you are already paying ~30% taxes, but profits are tax-free.

[summer27]

33 minutes ago, kran said:

I prefer Standard. Assuming company match is 50% and overall tax % is 30%,

Standard lo, to get $500 company match, you have to contribute $1000 pre-tax, means you will get $700 less in your take home salary.

Roth lo, to get the same $500 match, your take home will be less by $1000.

Future lo if you withdraw from Standard 401k when you dont have any income, then you lose only 10% of the withdrawn amount as penalty, upto the withdrawal amount that equals the lowest slab after the standard deductions.

Roth lo you are already paying ~30% taxes, but profits are tax-free.

Standard lo you can’t withdraw partial amounts, say if you have 100k in standard you will have to withdraw all.

[anandam2012]

16 minutes ago, summer27 said:

Standard lo you can’t withdraw partial amounts, say if you have 100k in standard you will have to withdraw all.

ala em ledu bhayya...you can withdraw partial amount if you would like

[summer27]

17 minutes ago, anandam2012 said:

ala em ledu bhayya...you can withdraw partial amount if you would like

No I don't think so..

[rmJU72]

why do you think of withdrawals, just take loan in extreme hardships. otherwise just leave it for retirement time

[chandrabhai7]

Ee Roth employer ivvala. Leka maname personal ga pettuko vacha

[krrish]

Okay, I am going with standard

[anandam2012]

24 minutes ago, summer27 said:

No I don't think so..

Can you do a partial 401k withdrawal?

 

 

You can make a partial withdrawal, as long as you will still have $5,000 left in the account. If your withdrawal will cause the balance to fall below this amount, then you will have to withdraw all of the funds in the account.

[kran]

17 minutes ago, rmJU72 said:

why do you think of withdrawals, just take loan in extreme hardships. otherwise just leave it for retirement time

evari avasaraalu vaallavi. Same company tho unte, you can take loan, but should repay it monthly. If you switch companies, then you have to take a withdrawal if you need funds from the previous company's 401k.

In case india ki relocate aipothe, it does not make sense to wait until they are ~65.

[anandam2012]

12 minutes ago, chandrabhai7 said:

Ee Roth employer ivvala. Leka maname personal ga pettuko vacha

maname open chesukovachu bro...employer tho sambandam ledu

[kran]

17 minutes ago, chandrabhai7 said:

Ee Roth employer ivvala. Leka maname personal ga pettuko vacha

Employer cheppina website lo you can enter the monthly contribution amount and specify whether you want standard or roth 401k or both. These values and options can be changed anytime throughout the year. FYI, I use Vanguard.

[rmJU72]

23 minutes ago, kran said:

evari avasaraalu vaallavi. Same company tho unte, you can take loan, but should repay it monthly. If you switch companies, then you have to take a withdrawal if you need funds from the previous company's 401k.

In case india ki relocate aipothe, it does not make sense to wait until they are ~65.

The point of a standard 401k is to use pretax money for long term and use at 65+. You also pay less tax now as a result. It doesn’t matter if you are in India or US. You can use it from anywhere in the world.

Keep separate funds aside for emergencies. 401k loan should be the fallback option after emergency funds are exhausted and withdraw only in the worst case.

 

 

[kran]

2 hours ago, rmJU72 said:

The point of a standard 401k is to use pretax money for long term and use at 65+. You also pay less tax now as a result. It doesn’t matter if you are in India or US. You can use it from anywhere in the world.

Keep separate funds aside for emergencies. 401k loan should be the fallback option after emergency funds are exhausted and withdraw only in the worst case.

 

 

Ideally, yes. But there are so many loop holes in this process. We should consider all the worst case scenarios and take a decision.