I originally had it set up to have 5% in each category but recently upon doing some minor research switched all contributions to Roth. I only make $12K-$15K right now (I’m a student) so it’s not a lot of money but I just want to build a good base especially since my company matches 5% so I don’t want to miss out on the free money. I also have a Roth IRA with vanguard that I contribute 5% of each paycheck to but I understand the gist of that. Any advice is much appreciated, thank you.

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sonnyfab t1_jdr6rnz wrote on March 26, 2023 at 3:33 PM

At your income level you should only do Roth. The wiki has a discussion on what marginal tax rate is "best" for switching from Roth to pre-tax.

You should never do "after tax" 401k contributions until you make enough money that you're already maxed on of your other contributions and your employer has a 401k where are you able to do a "mega backdoor Roth"

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DeluxeXL t1_jdr6ru2 wrote on March 26, 2023 at 3:33 PM

> I only make $12K-$15K right now (I’m a student)

Roth (either Roth 401k, Roth IRA, or both) is indeed the best option for you right now.

Don't worry about the after-tax now. You literally can't contribute enough into Roth to even need to use the after-tax space.

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andybmcc t1_jds3tj3 wrote on March 26, 2023 at 7:27 PM

At that income, Roth as others have pointed out. That's because your tax rate is very low at that income. You pay low taxes now to not pay taxes when you withdraw. In the traditional, you would not pay taxes now, but pay taxes when you withdraw, presumably at a significantly higher rate than what you're paying now.

Just note that your match will probably go in the "traditional" pre-tax bucket in your 401k. That's fine.

cheeyipe t1_jdrccwv wrote on March 26, 2023 at 4:13 PM

Anything you throw into a Roth is taxed upfront. So when you collect 40 years diwn the road you get it all. You are limited to how much you can put in a Roth IRA. SPREAD IT OUT. FIRST 10 YEARS WHEN YOU ARE YOUNG MAKES THE BIGGEST DIFFERENCE. TIME IS ON YOUR SIDE. DONT WAIT!!! YOU WILL WAKE UP 50 YEARS OLD ONE DAY SAYING I SHOULD HAVE STARTED WHEN I WAS 20. DONT LOSE THE FIRST 10 YEARS. WE ARE TALKING POSSIBLY MILLIONS IF YOU KEEP STASHING IT AWAY EVERY WEEK EVERY MONTH EVERY YEAR. YOU ARE SO SMART STARTING SO EARLY. YOU CAN DO IT!!!!