Ignoring Roth 401k Options

It’s important to figure out how much money you’ll need during retirement in order to live comfortably. It’s equally important to keep an eye on your tax situation, both before and after you leave the workforce.

That’s why some employers may offer you Roth 401(k) options, which work differently than traditional 401(k), for which you put aside pretax dollars that grow tax-free until you retire. In terms of Roth 401(k) plans, you’ll need to pay taxes when you make contributions, meaning you won’t pay taxes when you take qualified distributions. This is advantageous for those who think they’ll pay higher income taxes when they retire compared to today.

A good strategy is to contribute to both of these options, considering the fact that your total contribution limit will remain the same.