Suppose I want to put 10% of my income in a 401(k). There are two options: (i) put it in a pre-tax 401(k) of a a Roth 401(k). If I expect the tax rates to be higher in the future, would this be a good strategy:

  1. Put 2% of income into Pre-Tax 401(k)
  2. Put 8% of income into Roth 401(k)

Would this be better than putting 10% of income into a pre-tax 401(k) assuming that the tax rates go up in the future?


You are not locked in to this percentage of new money forever, you may change it every paycheck.

Pick a split that makes you feel comfortable. Then revisit how you allocate new money every year. If congress makes changes to the brackets; or your compensation changes; or the rules regarding retirement funds changes: adjust accordingly.

Note that the Roth IRA came long after the IRA; and that the Roth 401K came long after the 401K. You have no idea what types of investments you will be able to contribute to with your next employer, or how your martial situation and income will change the scope of available retirement options.

Heck you can even convert non-Roth to Roth in the future if that makes sense.

Pick a percentage for now, but don't forget to revisit it.

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