<p>I am new to this retirement business. My kid started a job and the company is offering retirement package as follows:</p>
<ol>
<li> Roth (401K)</li>
<li> Regular 401K</li>
</ol>
<p>Could anyone provide idea how much maximum money one put in these retirements funds. By reading it looks like that, one should maximize the Roth (401k). We believe that his income is going to go up in future therefore Roth401k is better than Regular 401 K. Thanks</p>
<p>Can you invest in both Roth 401K and regular 401k at the same time?</p>
<p>Do you believe taxes will be higher now or later? Personally, I think taxes are likely lower now than they will be later, so, for me, I’d max out the Roth option first. However, if you think taxes will be lower later, go with the regular 401K.</p>
<p>But it’s impossible to KNOW the future. I’m sufficiently cynical to worry that even Roth money will be taxed in the future.</p>
<p>Roth IRA is funded with AFTER Tax income while the Regular IRA is funded with PRE-Tax income. That is the major difference. The investment income from either account is not taxable until you start withdraw at age of 60 without penalty. But the principal of the regular IRA will be taxable when you start withdraw.</p>
<p>Anyway, as a young person, if you can afford it, its better to do Roth IRA, a better idea is to buy whole life insurance which is funded like Roth IRA, you get both insurance and the savings the same time. At a young age, the cost of insurance is cheap and you got maximum savings.</p>
<p>DMd77:
For my kid taxes will be higher in future even now kid is pays in more than way more than >> 10K in federal taxes alone. I told my kid to maximize Roth 401k by putting after tax 16,500 per year. Kid is planning to put another 16500 in Regular $401k or whatever is the highest limit allowed by law. We are not sure what is the limit of Regular 401K if one is also contributing towards Roth 401 K. After this any leftover money will be invested in Regular investment.</p>
<p>Artloverplus:</p>
<p>My kid is fortunate enough to invest as his field pays very well. However, working hours are pretty bad 100 to 110 hours per week.</p>
<p>I agree with Roth first when you are young and income is still relatively low (lower tax bracket). Later on in the career when you are in a much higher tax bracket, maybe you can do more regular 401K to take advantage of the tax deduction. Having sizable money in both Roth and regular IRA is a good thing, you will have the flexibility to withdraw the right proportion from each to reduce tax liability. There is no way to tell what the tax structure will be in the future, but hopefully you have time to adjust as things change.</p>
<p>You can invest in both a Roth and traditional 401(k), but the combined limit for all contributions is the same = $16,500 for 2011. Even at 50+ yrs old, I am maxing out the Roth contribution; I would certainly recommend the same strategy to my 22 yr old son. I am also contributing the full amount to my Roth IRA, in addition to the 401(k).</p>
<p>See [IRS</a> Publication 4530](<a href=“http://www.irs.gov/pub/irs-pdf/p4530.pdf]IRS”>http://www.irs.gov/pub/irs-pdf/p4530.pdf)</p>
<p>archiemom:</p>
<p>Questions for you? </p>
<ol>
<li><p>Can you open Roth IRA ($5000) on top Roth 401(K) ($16500). My kid is actually investing his reaminag income 50 K+ in regular investment but the profits are taxable income. (Money reaminated after rent+utilities+food+travel+entertainmaint etc.)</p></li>
<li><p>An accoountant advised my kid that on top of Roth 401k (16500), kid can invest anoth $5000 in Roth IRA and then can convert 5000 ROTH IRA to Roth $401 K. Thus easy to invest money in one place.</p></li>
</ol>
<p>I’m not an accountant or in the tax/pension business, but I just opened a Roth 401(k) and our company’s insurance adviser did tell me that I could max out both the Roth IRA and the Roth 401(k), with the kickers for being over 50. I was also told that I could roll my existing Roth IRA into the Roth 401(k) and they sent me the paperwork, so I’d guess that technically once you’ve opened the Roth IRA separately, you could roll it into the 401(k) in order to keep your investments in the same place. I would consult a financial adviser, just to be sure.</p>
<p>My son is also making a lot more money than he needs to live and has a plan to pay off all his student loans before the end of the year and start retirement investing. Congrats to your son on his foresight in planning for the future!</p>
<p>It’s easy to open a Roth IRA even if one’s income is too high to qualify for one. Here is a backdoor to opening a non-deductible traditional IRA and convert immediately to Roth IRA. Make sure there are no existing traditional IRA otherwise the tax situation can get complicated.</p>
<p>[Ask</a> the Expert: Is a non-deductible IRA worth having? - Sep. 14, 2007](<a href=“http://money.cnn.com/2007/09/12/pf/expert/expert.moneymag/index.htm]Ask”>Ask the Expert: Is a non-deductible IRA worth having? - Sep. 14, 2007)</p>