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Roth 401(k) vs Traditional 401(k)?

Roth 401(k) vs Traditional 401(k)?

July 10, 2018

As you save money into your 401(k), you might be able to choose whether to direct your funds into a Traditional 401(k) or a Roth 401(k)

What is a Roth 401(k)?  Check out this article to find out more:

                What is a Roth 401(k) 1

With a Roth 401(k), money goes in after tax, like the money that gets deposited into your checking account from your paycheck.  You didn’t take the tax deduction like a traditional 401(k).  But qualified withdrawals are not subject to taxes as they come out – all the growth in the Roth 401(k) can be withdrawn tax free. 2 3


So the question is, should I pay the tax (Roth 401k) now or pay the tax later (Traditional 401k)?


Here is a calculator tool to help compare deposits between the Traditional deductible 401(k) and the after tax Roth 401(k).


We always recommend you speaking with a tax advisor.


Let us know if we can help.



2 Distributions from 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.

3 Roth IRA contributions cannot be made by taxpayers with high incomes. To qualify for the tax- free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal also can be taken under certain other circumstances, such as a result of the owner’s death or disability. The original Roth IRA owner is not required to take minimum annual withdrawals.