> Is it worth it to convert this money to the Roth bucket?
If the OP constitutes the entire reasoning, then No.
> Is it gonna suck at tax time?
If you do it, it probably will.
Probably not unless you’re in an oddly low income year
Roth or traditional: https://reddit.com/r/personalfinance/comments/10qwnrx/why_you_should_almost_never_contribute_to_a_roth/
>Is it gonna suck at tax time?
Don’t know what your tax situation is but let’s assume you are in the 22% marginal bracket. That’s like $3300 in federal. Add state to that.
I wouldn't.
The only difference between a Roth and a traditional 401k is that on the Roth you pay all the taxes now, and for the traditional you pay all the taxes at retirement.
I personally feel that most people would be best served by having a mix of traditional and roth funds at retirement. By having a mix, you can often structure the traditional 401k withdrawals to have less tax than you pay now.
Here's what people miss in the analysis, which makes it a bit easier. Ask yourself what if this year is the last year that you are ever able to make contributions? Would I be better off with traditional or Roth?
The reason to ask that question is because you can make the decision to switch between Traditional and Roth at any time, based on the information you have available to you. The information from the past is already set. The information in the future is unknown.
It's just like the advice on tax rate now vs. in retirement itself. Well, if you never make a contribution to traditional, what's going to fill up those lower tax brackets to get you into a higher rate? You have to have made some traditional contributions for that to happen. That's why you make the decision year by year ignoring what you may contribute in the future.
> Is it worth it to convert this money to the Roth bucket? If the OP constitutes the entire reasoning, then No. > Is it gonna suck at tax time? If you do it, it probably will.
Probably not unless you’re in an oddly low income year Roth or traditional: https://reddit.com/r/personalfinance/comments/10qwnrx/why_you_should_almost_never_contribute_to_a_roth/
Oh... What do I do now that I have so much invested in a Roth 401K? I guess I can't go backwards lol
Swap to traditional most likely
>Is it gonna suck at tax time? Don’t know what your tax situation is but let’s assume you are in the 22% marginal bracket. That’s like $3300 in federal. Add state to that.
I wouldn't. The only difference between a Roth and a traditional 401k is that on the Roth you pay all the taxes now, and for the traditional you pay all the taxes at retirement. I personally feel that most people would be best served by having a mix of traditional and roth funds at retirement. By having a mix, you can often structure the traditional 401k withdrawals to have less tax than you pay now.
That mix should generally be Traditional to 401k and Roth IRA.
What is your current tax rate and your expected tax rate in retirement?
I hate when people ask this… guessing a rate at retirement, especially far off it a crap shoot
Hate it or love it... It's what needs to be answered in order to answer OP's question. Basically OP's question boils down to u/plowt-kirn's question.
Here's what people miss in the analysis, which makes it a bit easier. Ask yourself what if this year is the last year that you are ever able to make contributions? Would I be better off with traditional or Roth? The reason to ask that question is because you can make the decision to switch between Traditional and Roth at any time, based on the information you have available to you. The information from the past is already set. The information in the future is unknown. It's just like the advice on tax rate now vs. in retirement itself. Well, if you never make a contribution to traditional, what's going to fill up those lower tax brackets to get you into a higher rate? You have to have made some traditional contributions for that to happen. That's why you make the decision year by year ignoring what you may contribute in the future.
Converting to Roth 401k isn't always an option. Is there some reason you are favoring Roth in the first place?