Kiplinger.com Community - Year-end Bonus Election for 401k. Roth or Pre-tax?

		Kiplinger.com Community > RETIREMENT
Year-end Bonus Election for 401k. Roth or Pre-tax?

Thread Tools

Search this Thread

Display Modes

12-12-2008, 03:08 PM	#1
FlyingNun Registered User Join Date: Dec 2008 Posts: 1	Year-end Bonus Election for 401k. Roth or Pre-tax? So I am getting paid my bonus next paycheck and we have to make our elections shortly. I was considering my options and according to my thinking it would be best to put as much of this bonus into the 401k as i can since bonuses are taxed at a higher level right? Right now I do both Roth 401k and normal pre-tax. I am wondering which account is more beneficial to contribute the bonus to? any info appreciated i may be confusing myself on this...but on roth contributions since they are taxed up front....are they still taxed at the higher supplemental income rate upfront? thus negating the benefits on that...and making the pre-tax election more appealing for the bonus. is my thinking correct? Last edited by FlyingNun : 12-12-2008 at 03:16 PM.

12-12-2008, 07:40 PM

clydewolf

Registered User

Join Date: Oct 2001

Posts: 1,586

Quote:

Originally Posted by FlyingNun

So I am getting paid my bonus next paycheck and we have to make our elections shortly. I was considering my options and according to my thinking it would be best to put as much of this bonus into the 401k as i can since bonuses are taxed at a higher level right?

More income tax is whithheld from the bonus check. This is because the payroll department uses the IRS withholding tables and your W-4 to determine how much should be withheld. The amount on the withhholding tables is correct if you were to receive your regular pay plus your bonus in each pay check. The bonus may push you into a higher taxing bracket, but the same could happen when you receive your next pay raise.

When you file your 2008 tax return, this will all balance out.

Quote:

Right now I do both Roth 401k and normal pre-tax. I am wondering which account is more beneficial to contribute the bonus to? any info appreciated

i may be confusing myself on this...but on roth contributions since they are taxed up front....are they still taxed at the higher supplemental income rate upfront? thus negating the benefits on that...and making the pre-tax election more appealing for the bonus. is my thinking correct?

Generally, when the tax deduction today is more important than tax free income in retirement, contribute to the Traditional 401k.

When tax free income in retirement is more important than a tax deduction today, contribute to the ROTH 401k.

« Previous Thread | Next Thread »

Thread Tools	Search this Thread
Show Printable Version Email this Page	Search this Thread: Advanced Search
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode

Posting Rules
You may not post new threads You may not post replies You may not post attachments You may not edit your posts vB code is On Smilies are On [IMG] code is Off HTML code is Off

Forum Jump

Similar Threads
Thread	Thread Starter	Forum	Replies	Last Post
Want to put Xmas Bonus in Roth IRA...Questions	Matthew Whelan	RETIREMENT	5	10-12-2007 01:56 PM
Should we upgrade to a more expensive home	shellie	Home and Real Estate	20	05-16-2007 11:11 AM
Newbie	footloose	RETIREMENT	16	07-31-2006 05:14 PM
ROTH IRA-how to correct contribution year	egaus33870	RETIREMENT	1	04-04-2005 03:07 AM
5 Year threshold on Roth IRA Withdrawals?	Unregistered	RETIREMENT	1	01-21-2003 07:55 PM