How should I contribute money to my deferred compensation plan?
Currently I am a state employee and am vested in our pension. At the end of my 20-year career, I can collect 50 percent of my top two years, including overtime. i am currently seven years into my career and make $120,000 with overtime. I assume by age 50 that I will make between $175,000-$220,000. This would leave me with a pension of $90,000 or more per year in 2045. I plan to work a less aggressive job from ages 50-60.
Currently I contribute 10 percent Roth to my deferred compensation plan. Does it make sense to keep this as a Roth IRA or to do a traditional IRA and reap the tax benefits now? Would it make more sense to do half traditional and half Roth since I don’t know which would be better? If I switch from Roth to traditional, will this be kept in a separate fund than the Roth I already started?
Your pension will be fully taxable. I like the Roth account to have a non-taxable account to use for retirement. Keep doing it. Yes, Traditional and Roth are kept separate from one another, but only on your statements. They will have the same investment selections, just separated out for pre and post tax dollars. If you would like to see your retirement income in more detail. Please reach out to me via email or phone.