401k Roth or not?

[LivingAlmostLarge]

I have a chance to open my solo 401k for myself and I can do it pre or post tax so regular or roth 401k. I've never considered not doing the pre-tax version mostly because we usually do it in conjunction with the after tax mega backdoor Roth IRA. Plus 'we've been usually in a pretty high tax bracket. This year 2022 we will again be in the 37% bracket (last year was the only year we weren't in years). So the question arises should I do the regular 401k or Roth 401k? What should I do?

[myrdale]

I think the short answer is go with the Roth 401(k).

This is an excellent video from Dave discussing the subject.

https://youtu.be/HPWQ_zlKeyU

To summarize:

Say you retire with $1.7 million in the account, you only contributed $200,000 (regardless of if it is traditional or Roth) to it over your lifetime, the rest is growth. Now when you retire, if it is Roth then there is no taxes, if it is traditional then you'll need to pay around $400,000 in taxes.

I think the general line of thought is:

1) Roth 401(k) to what your company will match.
2) Roth IRA to max. (around $6k)
3) Roth 401(k) until you've reached 15% of your gross income for retirement savings (i am including the Roth IRA in that 15%).
4) Roth 401(k) to the max (around $20k)
5) Regular mutual funds past that.

The company match for the Roth 401(k) will go into a Traditional 401(k). Once a year roll that over into the Roth IRA and pay the taxes on it.
And if you're income is over the limit for the Roth IRA ($140k) then you have to do the back door stuff, but I do not yet have a clear understanding of it.

[Jluke]

Will you be in the 37% tax bracket in retirement?

when you do retire can you convert some of the traditional to a Roth each year? I don’t know those exact details.

The first question might help you decide on which to do.

[LivingAlmostLarge]

I don't know. I can't postulate right now the future is unclear is so many ways. I'm leaning now again to taking the bird in the hand 37%. But I could be wrong. Also this year I'll likely make $20-25kish. If I could get up $30-35k next year then I might also have room to do both 20,500 pretax and the rest post-tax. I'm moving our taxable account into this "retirement" account instead of taxable.

[jIM_MI]

If you maxed out the regular (pre-tax) 401k, what would you do with the money? Would you save it in a post tax account?
The main advantage of the Roth wrapper to me is that there are no RMD at age 70.5

I would review 3 options
1) Roth 401k max- main advantages are tax free withdraws at any age/ no RMD
2) Regular 401k max and do NOT invest tax savings- this is giving you a tax deduction now which you get NOW and the savings is used to enhance standard of living NOW, the government requires you to take money out of 401k at age 70.5
3) Regular 401k max and invest tax savings in a taxable account- this gives you a tax deduction now, and a third type of account to dip into at any age of retirement (for example if you retire early, this taxable account would likely allow other tax deferred accounts to grow longer).