Many employers offer a Roth 401(k) option as part of their 401(k) plan. With a Roth 401(k), your contributions are after-tax dollars rather than pre-tax dollars, and the withdrawals you make in retirement are not taxed as income.
Roth 401(k) accounts have the same contribution limits as traditional 401(k) accounts. If your employer offers a 401(k) match and you contribute to a Roth 401(k), you are still eligible to receive the match. It will, however, be deposited into a traditional 401(k) for you because of federal regulations.
The key to deciding between a Roth vs traditional 401(k) is determining when you believe your taxes will be lower: Now, while you’re making contributions to your 401(k), or years from now, when you’re making withdrawals in retirement.
If you think your income taxes are higher today, contribute to a traditional 401(k) account and benefit from lower taxes on withdrawals in retirement. If you think you’re probably in a lower tax bracket today than you will be in retirement, a Roth 401(k) account is a better choice for now.
Please let me know if you have any questions. I’m here to help! To your incredible FINANCIAL success! “RETIRE BEFORE YOU EXPIRE”
– SHATEKA Husser
