[Music] okay, next up we've got a question from Ean 1122. It says, My employer offers both traditional and Roth contributions for my 401k plan. I am currently contributing a mix of both. Would it be better to go all in on one or the other? And this is a good, I think this is a good question 'cause when you sign up for these accounts, then you realize there's more choice sometimes when you're new to this, you know. I'll let you give the answer, but I do think it's interesting because I run a unique perspective, you know. We have 40 employees here. I'm the one that runs payroll. I'm the one that administers the 401K. Um, so I see all the contributions. I'm all-knowing on what everybody here at the firm does with their money. And I'll just tell you, this is not scientific, but this is just telling you what with I CNR 41 401K. Everybody here at my firm, 30 9, well I shouldn't say 'cause there's not 39.

people in the plan, but of all the people contributing to the plan, only one person is doing a mix exactly like you can. Um, everybody else is kind of, you're either all in on the Roth, you're all in on the traditional, 'cause typically. Now, look, I know that there's some new tax laws where they're saying that you can even have your employer contribution go in Roth. I don't know a lot of employers doing that because usually when the government comes up with these policies, they make it so dagam hard that most of your employees don't, are not on the front end of adopting this stuff. So most of your time, most of the time, the employer contribution's still going to be tax-deferred or more of a traditional contribution because the employer's taking the deduction as they fund that for you. But Bo, what would you say to this? Well, you can, you know, we're really, really good financial advisers, and your question was, would it be better to go all in or one or the other? And our answer, of course,

is it depends. It depends. It depends on your unique situation, but we do have some rules of thumb that can help you. What we say is that generally, if you look at your marginal federal rate and your marginal state rate, you add those together, and they're below 25%, there's a really good chance you can should consider doing WTH or tax-free contributions because you're in a pretty low tax bracket, and it seems like unlikely that you'll be in a lower tax bracket when you get to retirement. On the other side, though, if you add up your marginal federal, marginal state, and those that sums to greater than 30%, well then, there's a really good chance that you might want to consider doing all pre-tax contributions because every dollar you put into the 401K will save you 30 cents in taxes. You can think about that like a 30% imputed rate of return. So if you're below 25, we love Roth. If you're above 30, we love pre-tax.

if you happen to live in that 25 to 30, well then it depends. That's where it gets a little bit more nuanced based on your age, your account structure, your risk tolerance, your time horizon. In most situations, it probably does make sense to go one way or the other, but that depends on your unique situation. And what we love is it's not an either-or. Am I building tax-free dollars or am I building pre-tax dollars? We love when you do both. We want to see if you are doing pre-tax 401K. Let's fund Roth IRAs or let's fund backdoor Roth IRA so that way you still get the best of both worlds.

Traditional vs. Roth 401(k): Which Should You Choose for Maximum Growth?

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