Where Does the Roth 401k fit in?

[Jluke]

Just when I was getting up to speed maxing the 401k at 18k and Roth IRA at 5500, my company recently announced that a Roth 401k would be available to us (no details yet) as well.

So what should my strategy be now with having this option?

I believe the math is:
53k allowed across 401k accounts
minus 18k from 401k
minus Employer Match Contributions
equals what I could possibly contribute.

The 5500 Roth IRA doesn't get factored in.

thoughts, suggestions and personal experiences appreciated.

[ashown]

My employer offers Roth 401k as well. Currently, I am putting 6k in Roth and 12k in regular 401k. I have been with current employer only for a year, so I wanted to try out Roth 401k. Some of my observations, which may not be applicable to you,

- The fund are same for both regular and Roth 401k. I cannot invest money in certain funds for regular and then in Roth 401k. One selection applies to both.
- same is true for the returns. The earning are split in same percentage as the investment.
- The 18k limit works very differently with Roth than regular. What I learn is: true investment of 18k in Roth is equivalent to ~22k of Tradional 401k. I am still trying to confirm this, but when I put 6k in Roth, I actually put ~9k pretax money, which would make the total 401k investment to 21k. My employer says it's fine, but I am in the midst of further confirming this.
- Employer contribution is outside the 18k limit. In my case, it's contributed all to regular 401k.

My goal is to potentially start putting 12k in Roth and rest in regualr in 2017.

[MonkeyMama]

I believe the math is:
53k allowed across 401k accounts

It's $18,000 "employee contribution" across 401k accounts.

So you will have to decide if you want to allocate some of the $18,000 over to the ROTH 401k.

[Jluke]

Thanks to ashown and monkey mama for pointing out 18k across the 401k options.

I will probably stick with all pre-tax 401k to reduce tax burden. Still stings to only see ~50% of my gross salary as net income.

Where did I come up with the 53k- backdoor roth? After tax option? I read so much stuff I get crossed up.

[MonkeyMama]

Where did I come up with the 53k- backdoor roth? After tax option? I read so much stuff I get crossed up.

$53k is a retirement plan limit. Your 401k + match would not be able to exceed $53k, so you were on the right track.

[puck36]

Just when I was getting up to speed maxing the 401k at 18k and Roth IRA at 5500, my company recently announced that a Roth 401k would be available to us (no details yet) as well.

So what should my strategy be now with having this option?

I believe the math is:
53k allowed across 401k accounts
minus 18k from 401k
minus Employer Match Contributions
equals what I could possibly contribute.

The 5500 Roth IRA doesn't get factored in.

thoughts, suggestions and personal experiences appreciated.

Why not do the max in the Roth 401k then the Employer Match would be in the Traditional 401k.

[Jluke]

Why not do the max in the Roth 401k then the Employer Match would be in the Traditional 401k.

From what I can tell the reasons are Tax purposes and take home pay. Need to reduce my income (AGI) with the pre-tax 401k

If I did the Roth 401k I would pay even more in taxes and make less net income