Traditional or Roth 401(k)
Traditional 401(k)
Your deferral goes in pre-tax; earnings grow tax deferred; tax are due upon withdrawal.
Roth 401(k)
Your deferral goes in after-tax; earnings grow tax free; tax free withdrawals as long as certain conditions* apply.
Which one is right for you?
" I am all over Roth."
Just starting a career
Relatively lower income tax bracket
Believes income (and taxes) will increase in the future
Isn't worried about current tax deduction
"I'm more the traditional type."
Can't really afford more taxes now
Needs more tax deduction
Doesn't expect to be in a higher tax bracket when he retires
"Both, please."
Isn't sure whether taxes will be higher or lower in retirement.
Wants to diversify tax strategy
Still wants a current income tax deduction.
