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    garf902's Avatar
    garf902 Posts: 1, Reputation: 1
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    #1

    Jan 11, 2011, 08:50 AM
    I work tax exempt. 401k or roth 401k
    I am a US citizen and work overseas. I have the tax exempt status up to $85,000. This being said, should I invest in a 401k(which is before taxes) or a Roth 401K since I really don't have to pay taxes on the income I have.

    Regards,
    Garf
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #2

    Jan 11, 2011, 08:54 AM

    If you pay no taxes now on your wages, then the Roth clearly makes the most sense, assuming that when you retire you'll be back in the US and subject to income taxes like the rest of us.
    smoothy's Avatar
    smoothy Posts: 25,492, Reputation: 2853
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    #3

    Jan 11, 2011, 12:04 PM

    Yes something that's not taxed (under current law anyway) at withdrawl time. I think the inverstment funds should be treated as post tax income, not pretax income.

    I've done that for a number of years... question for the OP. You are still Obligated to SSI and Medicare taxes, correct... just exempted from federal, State and local Income taxes? THAT was the situation I was in for almost 6 years.

    Curious how the current tax code views this however. Its been nearly 2 decades since I was in the situation.
    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,301, Reputation: 7692
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    #4

    Jan 11, 2011, 12:42 PM

    Well unless there is matching company funds, I am a full supporter of the Roth even if you were paying taxes
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
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    #5

    Jan 11, 2011, 01:19 PM
    Quote Originally Posted by Fr_Chuck View Post
    Well unless there is matching company funds, I am a full supporter of the Roth even if you were paying taxes
    It's really not all that cut and dry. If you think your tax rate will be higher when you retire than it is now, then yes, a Roth makes sense. If you think it will be lower, then not. Of course the crystal ball can be very cloudy, and throw in differences in tax laws between states and it makes it murkier. For example consider a worker currently living in NYC and planning on retiring to FL - a Roth would probably not make sense for that person.
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