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Use Tax Brackets To Choose Roth Or Pre Tax
- Roth vs pre-tax choice depends on current and future marginal tax rates.
- Rule of thumb: combined marginal federal + state under ~25% favors Roth; above ~30% favors pre-tax contributions.
After Tax Contributions Enable Mega Backdoor Roth
- After-tax 401(k) contributions let high savers exceed salary-deferral caps and enable mega backdoor Roth moves.
- After-tax contributions (taxed going in) can reach the $66,000 limit and be converted to Roth if the plan permits.
Avoid 401k Loans Unless Last Resort
- Avoid 401(k) loans except as last resort because they remove money from the market and can trigger taxable distributions if you leave your job.
- Loans reduce invested time, may block new deferrals, and are amortizing so they often cost more than perceived interest benefit.