I have a Roth 401k available to me at work. I think the Roth’s are a great thing. I don’t know why more people don’t take advantage of them. I am the only employee at my work that has contributed to the Roth 401k and they have been offering it for more than a year. With a Roth 401k or Roth IRA you pay taxes on the money now but you don’t pay taxes when you need to withdraw the money. If you have both a 401k and a Roth 401k you have two “buckets” of money and you can decide during retirement which is better to use first based on the tax circumstances at the time. If all you have is a 401k, you don’t have a choice, you have to pay taxes when you take the money out. With the huge deficits this country is building up, do you think our taxes will be going down or up? Would you rather pay taxes on some of your retirement money now or later?
There are other benefits to the Roth accounts: You aren’t required to start pulling money out after age 70 1/2 like you must do with a 401k and regular IRAs. You can leave the Roth “bucket” alone if you don’t need it. You can can leave a larger legacy to your heirs and they can draw on it for the rest of their lives (or immediately) - tax free. Also the money taken from a Roth won’t count in determing whether any of your Social Security benefits will be taxable.
So why don’t more employees take advantage of the Roth 401k? Any ideas?
