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> By having both pre-tax (401k) and post-tax (Roth IRA), you would be also diversifying your tax liability in your retirement. The way your comment is written,
by chimeracoder 10y ago
> By having both pre-tax (401k) and post-tax (Roth IRA), you would be also diversifying your tax liability in your retirement.
The way your comment is written, it implies that 401(k)s are necessarily pre-tax and IRAs are necessarily post-tax. Both 401(k)s and IRAs come in Traditional and Roth forms, so you could also use pre-tax money for contributing to your IRA, and post-tax money for contributing to your 401(k), or any combination thereof.
You can also split contributions - ie, contribute to all four accounts in the same year - as long as your total contributions are within the limits.
- sikim 10y agoYes, that is correct. I generally prefer to have my 401k all pre-tax (traditional) and my IRA post-tax (roth) to make it easier to manage. Also, this would open doors for backdoor roth IRA contribution once you go over the government's income limit for contributing to IRA, but this is a whole different topic.
- dlp211 10y agoThere is also the mega-backdoor Roth, but your 401k plan needs to support it.