Thanks @Ned Carey @John Knappmann
@Marco Santarelli &
@Chris Adams Years of browsing and chatting on the twoplustwo forums (check them out if you haven't) brought me a ton of knowledge and made me a lot of money, I know that won't compare to what I learn here. It's suprising how many decision I make in life that I relate back to poker. Every situation seems to have pot odds and +EV that can be analyzed :)
@Tim Barry
Deciding Roth vs Traditional comes down to taxes.
Example of someone who might want to do Traditional contribtions:
Joe - 59 years old further along in his career making more money in a higher tax bracket. Joe wants to go in pretax because he is in a high bracket right now and when he retires next year he knows his taxable income is going to drop off because he's no longer working. So he wants to avoid his 25% tax bracket when putting the money in, because he's much happier paying the 10% tax bracket when he takes it out. So someone that believes they will be in a lower bracket when they take the money out and chances are they'll retire before the politicians make any drastic tax changes.
Example of someone who might want to do Roth contributions:
Billy - 20 years old making minimum wage. Billy doesn't mind the money going in after tax. He's only in the 10% bracket right now and has no idea what bracket he'll be in when he wants to take the money out, but is guessing it will be more than 10%. So someone that believes they will be in a higher bracket when they take the money out OR they realize that the politicians like to change taxes on us over time and we really don't know what taxes will look like in 5, 10, 20, 40 years so I'd rather just get it out of the way now and never have to think about it again.
They are both tax advantaged accounts so either are good things to be putting money into. There are other differences that you'll want to think about too, but that gives you somewhat of a thought process to have on how you want your money taxed (because Uncle Sam is taking his cut at one point or another).
Whenever you get a match you always need to do that to get free money. No matter what your tax situation never pass on free money. You said you're currently maxing your 401(k) and then some into IRA, so you're adding more than $17,500 into your retirement accounts. The max for 2013 is $17,500 in 401(k) and $5,500 in IRA's. So unless you make $290k a year 6% won't max out your 401(k). If you make $75k for example you can do 6% to get the match, which would be $4,500 into 401(k). Max out Roth putting in $5,500, and now you're up to $10k in retirement accounts. Since you already do over $17,500 you have to figure out where to put the remaining $7,500+. Here's where you'll want to go back to the examples above and talk with a tax professional. It's your tax persons job to make sure you never pay more in taxes than you have to. You can also compare fees and expenses between your 401(k) and IRA and weigh out any other pros and cons. IRA's can be done dirt cheap through something like Scott Trade and by putting money into an index fund with very minimal expense ratios. That's not for everyone though, some people prefer 401(k) even though they're more expensive because maybe they have a really helpful rep like me that talks them out of selling off all their stock when the markets at the bottom, or don't have the time or interest in taking care of it themselves or like that it's done right out of payroll because they know realistically they won't be deligent enough to regularly contribute on their own, or whatever...
Just like you diversify between stocks and bonds and different funds, it's not a bad idea to diversify between before and after tax money. That way when you retire you can decide on what pool of money to take out of, the Roth or Traditional. Also Traditional the IRS will make you start taking money out after age 70 where Roth you can leave in their forever or pass on to your heirs or favorite charity.
Well hopefully this answers your questions, unfortunately usually the answer always comes down to it depends, but CPA should be the one that gives the answers for your specific situation because the question between Roth and Traditional comes down to taxes and it's their job to make sure you pay the least amount possible.
Let me know if you have any other questions.
Disclaimer: Always talk to a trusted licensed professional about any tax and investment questions. The above is just the 2 cents of a random guy on a real estate forum and not a guaranteed answer or solution :)
