I am 33 years old and currently enrolled in my employers traditional 401(k) plan where I am putting 4% of my salary pre tax and having a maximum of 4% employer match into my plan. After 6 more months of seniority I will be 100% vested and that employer match money will be mine to keep even if I leave.
My employer is advertising to us that they just added the option of a Roth 401k now. I am allowed to enroll in both at the same time and can choose to set contribution amounts for either. My employer will still match up to 4% in the Traditional plan, even if I choose to split MY contribution however I wish, even if I put 0% of my own money in Traditional 401(k) (apparently IRS rules say all employer contributions are pretax?):
(Eg. I can put 2% pretax income in Traditional, 2% post tax income in Roth, and Employer can put 4% contribution in traditional as an example.)
Apparently once I am vested, they offer Roth Conversions where I can move money from my Traditional 401k to my Roth 401k, and I can do this up to twice a year. When I do then of course I have to claim this money on my taxes that calendar year and pay taxes on it.
When I am 59.5 years of age I can take money from this and not have to pay income taxes nor cap gains on earnings.
My question is, what is the best choice here? Outside of my 401k I have a Traditional IRA with roughly the same amount, but I currently do not have a Roth.
- Should I ignore this new offering and continue to put 4% into my Traditional?
- Should I split my contributions and put 2% into Traditional and 2% into Roth?
- Should I stop putting into my Traditional and let my employer put 4% match into Traditional and then I put 4% post tax into Roth?
- Something else entirely?
Note: I contend that my question is similar to the tagged potential dupe though a different question. The potential dupe is from the context of someone newly entering the workforce, where my situation is of somebody with over 10 years into a career earning near the glass ceiling for my profession in my area of the country.