My company's plan will let me put funds into the 401k plan either pretax (traditional, with taxes taken at withdrawal) or Roth-style (post -tax nut no tax at withdrawal) or both. Any company match apparently must be fed into the traditional plan.

I still haven't properly figured out what my best allocation for new contributions should be. I do expect my post retirement income to be lower but I'm not sure by how much. And while I'm not planning on retiring any time soon... well, I'm not over the hill but I can see the summit from here.

I'm going to run this question past my financial advisor anyway, but I thought it might be a good one for discussion. Given the option, which flavor(s) of retirement plan contribution should folks pick under what conditions, and why?

  • 3
    Why dividends need to go to the traditional? If you hold the stock in Roth - dividends should go to Roth.
    – littleadv
    Apr 30, 2015 at 6:39
  • 3
    What littleadv said - When you hold a Roth 401(k), company match, or company deposits, either one, go into the traditional side, but the Roth is a standalone account, its own dividends don't get spun out, they remain in the account. You must have misunderstood, a custodian can't possibly (?) get this simple detail so wrong. Apr 30, 2015 at 9:36
  • Yeah, probably did confuse match w/ dividends. I'll fix.
    – keshlam
    Apr 30, 2015 at 13:39
  • 1
    @ChrisW.Rea - related, but the numbers are in far better focus at 56 (to project retirement) than at "recent grad." They would combine nicely for an overview of doing the numbers at different stages of life. Apr 30, 2015 at 20:31

1 Answer 1


Your profile puts you at 56. You don't mention if you're married. (If you did mention, in conversation, I forget).

With retirement possibly 10 years or fewer away, I'd be looking at the impact of Social Security taxation on my 401(k)/IRA withdrawals. The linked article is almost three years old, but still works well to illustrate the fact that once income (defined as Your adjusted gross income+ Nontaxable interest+ ½ of your Social Security benefits) exceeds $44000 during retirement, up to 85% of your benefit is taxable.

In the pre-retirement decade, it makes sense to be aware of this, and if your pretax assets are in the $1M range (enough to withdraw $40K/yr) shifting to Roth, and even converting a bit of Roth, might be in order. Looking further, instead of taking your SS benefit at 66, drawing down the pretax accounts for the first 4 years would reduce the potential tax hit, but also increase your benefit by 32% (plus inflation).

That said, if you are already well above $1M, and won't be able to convert so rabidly, just ignore this. Those in this situation will see their SS taxed, and it would be even more costly to avoid that taxation. For those well below, continue to save pre-tax, but monitor the numbers to avoid hitting the level that taxes your benefit at retirement.

Since you are already well aware of your current vs potential future marginal brackets, in my opinion, the largest issue you face is that SS taxation issue. If your advisor doesn't bring up that issue, I'd get a new one. Let us know how it goes.

  • Ok; that sotra matches my "unimpeded by the thought process" guess, and gives me some things to pursue. (The profile is deliberately not entirely correct. -- SE has no reason to know my birthdate -- but is close enough for purposes of discussion. ) And for budgeting purposes I'm ignoring Social Security anyway.
    – keshlam
    Apr 30, 2015 at 13:45
  • And fwiw I'm technically single, I've just been dating the same woman for 30 years. We confuse people, and I consider that good for them.
    – keshlam
    Apr 30, 2015 at 13:50
  • Well, I am only 52, but SWMBO is 59, so SS starts to enter my equations. On the chance it's there to collect, best to not shoot yourself in the foot. Apr 30, 2015 at 14:39
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    I had to Google "SWMBO". Does that date me as young or old?
    – Rocky
    Apr 30, 2015 at 15:12
  • It came into common use in the days of Usenet, so pre-WWW. So, I suppose, those under 50 or so are less and less likely to frequent usenet, under 40, most have never heard of it. Apr 30, 2015 at 20:28

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