Choosing Between 401K And Roth 401K?

Questions & AnswersCategory: Retirements PlanChoosing Between 401K And Roth 401K?
1 Answers
Staff Staff answered 2 years ago

Several factors will lead you to a decision. How much you’re paying in taxes versus the two options and how much you anticipate paying. Your marginal rate is the key rate to use for your tax planning. In other words, when you want your investment taxed. In a standard 401(k) plan the money is deducted from payroll and not reported as income and may or may not include an employer contribution that should also be factored into you planning. Typically, when an employer matches (up to a certain amount) it’s an easy choice, take as much of a match as you can get.. The benefits when withdrawn are fully taxable as ordinary income. With a Roth 401(k) the benefit is paid with after-tax dollars, however, the entire benefit (principle and earnings) is free of income tax if the plan has been in force 5 years and you are more than 59 1/2 years old, if you become disabled, or are buying your first home.

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