CA Investment Priority

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
N10sive
Posts: 677
Joined: Thu May 05, 2016 6:22 pm

CA Investment Priority

Post by N10sive »

Hello I have another investment priority question for CA.

Details:
38 Single, 22% marginal tax bracket(mid bracket), State 9.3%. 11% effective tax rate
Contributing to 401k up to Match.
Contributing max to HSA

After that with limited amount to contribute to next, which investment should they put into? Roth IRA or finish the 401k?
Last edited by N10sive on Fri Jun 11, 2021 12:38 am, edited 3 times in total.
User avatar
Clever_Username
Posts: 1830
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: CA Investment Priority

Post by Clever_Username »

Marginal tax bracket matters more. If you're in California, what's your state tax bracket? That will affect the conversation. The reason this matters is that your 401(k) contributions save you at your marginal, not effective, rate.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.
Flyer24
Moderator
Posts: 3105
Joined: Sun Apr 08, 2018 4:21 pm

Re: CA Investment Priority

Post by Flyer24 »

Topic moved to Personal Investments.
Topic Author
N10sive
Posts: 677
Joined: Thu May 05, 2016 6:22 pm

Re: CA Investment Priority

Post by N10sive »

Clever_Username wrote: Thu Jun 10, 2021 11:24 pm Marginal tax bracket matters more. If you're in California, what's your state tax bracket? That will affect the conversation. The reason this matters is that your 401(k) contributions save you at your marginal, not effective, rate.
Updated with state.
calwatch
Posts: 344
Joined: Wed Oct 02, 2013 1:48 am

Re: CA Investment Priority

Post by calwatch »

If you're mid bracket at 22% you are likely still in the 9.3% state income tax bracket. I would favor the Roth just for tax diversification, although if the 401k is good with low cost investment options that wouldn't be a bad choice either. It depends on where you think your tax rate will be in the future, if you are receiving a pension, and whether you plan on retiring in California or another high (income) tax state. If you knew you were going to move to, say, Nevada or Washington, states with no income tax, then the traditional IRA would be an easy choice because you could essentially practice tax arbitrage.
Topic Author
N10sive
Posts: 677
Joined: Thu May 05, 2016 6:22 pm

Re: CA Investment Priority

Post by N10sive »

calwatch wrote: Fri Jun 11, 2021 1:08 pm If you're mid bracket at 22% you are likely still in the 9.3% state income tax bracket. I would favor the Roth just for tax diversification, although if the 401k is good with low cost investment options that wouldn't be a bad choice either. It depends on where you think your tax rate will be in the future, if you are receiving a pension, and whether you plan on retiring in California or another high (income) tax state. If you knew you were going to move to, say, Nevada or Washington, states with no income tax, then the traditional IRA would be an easy choice because you could essentially practice tax arbitrage.
Yeah, 9.3%. I think they will stay in CA forever. Parents are close in Nevada but most other family is in CA. I was thinking Roth as well, but can save a lot putting into the 401k since they might be only putting in 6k to the 401k with a 3k company match. No pensions or anything else but they live very frugally.
wetgear
Posts: 254
Joined: Thu Apr 06, 2017 10:14 am

Re: CA Investment Priority

Post by wetgear »

https://www.bogleheads.org/wiki/Priorit ... nvestments This should be applicable for most everywhere in the US including Ca.

Hard to give much other advice but if you post in this format with all the details we can give you better/more complete advice: viewtopic.php?t=6212
Post Reply