Please help me decide between Roth 401k or Traditional 401k...or both

[billchrz]

My company will begin offering a Roth 401k in addition to our traditional 401k on January 1. I'm looking for help to determine what the best course of action would be if any.

Here are the details.

This year's household income will be about 110k. This includes a few bonuses, salary, ot, and my wife's disability. I anticipate that we will earn between 95k-110k next year. We will probably have to file in the 25% tax bracket this year because our deductions, 401k, etc will not bring us down to the 65k AGI.

I currently max out my Roth IRA every year.
I contribute 7% to the traditional 401k right now with a 9% match (yes, it is a phenomenal benefit)

Should I contribute only to the traditional 401k, roth 401k, split evenly, etc?

I think that I will stop contributing to the Roth IRA and put at least 5k/yr in the Roth 401k to take advantage of the match.

Any help would be very much appreciated.

I'm 31 years old

[disneysteve]

Sounds like a question for Jim...

[jIM_Ohio]

At 110k AGI you would need 46k of deductions to get into 15% bracket. 7% 401k is 8k deduction. You need 36 more.

My suggestion- traditional 401k only, saves you 25% now. I bet you could convert to Roth in 15% bracket later.

Unless you see annual income being 160k and annual expenses in 160k range in retirement, I suggest saving 25% now.

[billchrz]

Thanks Jim. I think that we can get it down to about 70-75k with mortgage interest, property taxes, donations, etc but still would need another 5-10k.

What do you think about putting 5k into the Roth 401k instead of the Roth IRA?

[jIM_Ohio]

think put the 5k roth into traditional 401k

lowers your tax bill $1250
gets you into 15% bracket (70k-5k=65k)
then put 1250 tax savings into the Roth at 15% bracket.

[billchrz]

Jim, you are a genius.

Thanks again!