Excess Roth Investments

[PapaB]

We have more in our Roth 401k account than we need during retirement. I believe all gains are tax exempt in this account. I don't think I have to worry about long- vs short-term gains or taxes of any type? It seems that a prudent strategy would be to invest the amount we need to retire conservatively while the rest should be invested to concentrate the most gains among all our investments, that is, invested aggressively. Is this correct?

[retiredjg]

We have more in our Roth 401k account than we need during retirement. I believe all gains are tax exempt in this account.

This is only true if you wait long enough. Things like your age and when you made your first contribution to Roth 401k and/or Roth IRA will determine if anything is still taxable.

I don't think I have to worry about long- vs short-term gains or taxes of any type?

Correct.

It seems that a prudent strategy would be to invest the amount we need to retire conservatively while the rest should be invested to concentrate the most gains among all our investments, that is, invested aggressively. Is this correct?

This is one way to do it. I believe this is called a "liability matching portfolio". Use the google box to search and find previous threads. There may be information in the Wiki as well.

[celia]

We have more in our Roth 401k account than we need during retirement. I believe all gains are tax exempt in this account. I don't think I have to worry about long- vs short-term gains or taxes of any type?

Roth 401Ks are almost like Roth IRAs, especially since the Secure 2.0 Act just about made both of them alike (except the 401k is funded through payroll withholding and IRAs are funded by you using Taxable money). As long as you are over 59.5 and had opened an account at least 5 years ago, the withdrawn amounts are tax-free. Since these accounts can continue to grow tax-free, many of us think of these as the most valuable “dollars” we have and don’t plan on withdrawing unless we don’t have any other options or other options push us into higher tax brackets.

It seems that a prudent strategy would be to invest the amount we need to retire conservatively while the rest should be invested to concentrate the most gains among all our investments, that is, invested aggressively. Is this correct?

Your tax-deferred accounts should be invested conservately, such as in bonds. (Bonds also generate interest which is not taxed favorably. Every dollar withdrawn from tax-deferred is taxed as ordinary income, so it makes more sense to put the bonds and their interest there.)

Once you have enough invested in tax-deferred to cover your yearly shortfall for living expenses for several years, you can let the Roth do it’s thing and grow at a faster rate. That is why it is recommended to put your stock funds in Roth.

HOWEVER, if the space in tax-deferred and Roth accounts can’t hold all the bond and stock funds you want (according to your Asset Allocation), then just put these where you can since your AA is more important than where you locate each asset.