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Comment by jeffwilcox | Hacker News Reader

Super surprised to see that tech employees aren't funding their 401K the full $18,000 per year. :(

The conventional wisdom is to first max your 401k up to your employer's match, then max your Roth IRA contribution if you're eligible. After that, the optimal savings path depends on your priorities.

Any reasonably good employer-offered 401(k) plan will include a Roth option.

If you're living in a high COL city for work, a Roth seems silly. My marginal tax rate (keeping roughly 55% of my bonuses) is decidedly out of whack with my standard of living (barely affording a 1BR). I'll do whatever I can to tax-shelter money in this environment.

In retirement, I can raise my standard of living while halving my spending by relocating to somewhere that's not a high-end job center. That would mean a much lower income tax bracket.

Whether you put money in a Roth account (Roth IRA or Roth 401k) depends on your future earnings potential. If you think you will earn more in the future than you do today, it makes sense to contribute to a Roth. The reason is that you pay less taxes now than you will in the future, and money inside Roth accounts grows tax-free.

I don't quite understand how your current city's cost-of-living factors into this equation. At the end of the day your investment choices are primarily governed by your income tax bracket now vs. in the future. This holds true regardless of whether you are planning to retire in a low cost-of-living city - which is something everyone should plan to do anyway regardless of the type of retirement account they have.

I expect my 401k withdrawals in retirement to be much smaller (in real terms) than my present income, and therefore taxed at a lower rate, as my salary is heavily inflated above what my standard of living would require due to 1) local rents, and 2) my savings rate.

With sane housing priced and no need to save, I could live the same way on about $45k/yr less.

A Roth is often the only option for high-income workers (after maxing out a 401(k)). Traditional IRAs have an income limit of $72k for individuals and $119k for families in 2017; if you make more than this, none of your contributions are deductible or in any way tax advantaged.

Roth IRAs have income limits as well for contributions, but as long as backdoor contributions are allowed, you can still manage to contribute regardless of your income. Saving some on taxes coming out is better than not saving anything on taxes whatsoever.

In this situation though, a 401(k) is almost certainly a higher priority. But once that's maxed, an HSA (as a retirement vehicle) and Roth IRA are still very good.

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