Quote:
|
Originally Posted by ChiefsfaninPA
To help you better I want to explain two things off the bat. One I have a B.A. in accounting so I know a little something about this and two I do all of our retirement benefits for the State so I deal with this daily. If you are investing in a 401k it is ALWAYS pre-tax. That is how the IRS defines it in Section 401 of the tax laws. Now in the last year Congress has approved the use of a Roth 401k which works the same as the 401k EXCEPT your contributions are taxed first. That way when you do retire and make withdrawals (which on a Roth of any type, whether 401k or a regular Roth) you do not pay taxes. The only benefit to the Roth IRA or Roth 401k, besides having tax free withdrawals, you also do not have a minimum you must withdrawal yearly. A 401k has a certain amount you must take out yearly when you reach a certain age (70 1/2). Another factor is your income. .
|
Is the Roth IRA the one that can be used for your kids college with no penalties? I am currently putting in 8% pre-tax with employer matching 4%, but I am thinking about putting anything over 4% into a post-tax Roth IRA. My wife stays at home, I have 2 kids, and last year I only paid $200 in federal taxes. That is not paying $200 at tax time, that is getting everything that I paid back, except for $200. I actually paid more to Kansas City than I did to federal. This year I will be able to claim an additional kid, and we moved so I will have about $15000 in interest that I can claim, so I should pay even less. I don't have a lot of cash to put away right now, but want to take advantage of my nearly tax free status right now, and get some money in a post tax program.