Withdrawal rul… Roth vs. It can be a surprisingly complicated choice, but many experts prefer the Roth 401(k) because you'll never pay taxes again on withdrawals. any money that you withdraw in retirement will be tax-free, trillions of dollars the government is spending to help its citizens, other key differences between a Roth 401(k) and Roth IRA, converting a traditional 401(k) to a traditional IRA doesn't help, Here's the average 401(k) balance by age and how to raise yours. While the experts love the Roth 401(k) for its many tax benefits, you'll have to decide whether that makes sense for your needs and future. Predicting the future is hard. How did Sally end up with more in retirement than Sam? Regardless of which plan you choose, 401(k) plans have some things in common. For example, New York State residents who are at least 59½ are entitled to a state income tax deduction of up to $20,000 if that money comes from a qualified retirement plan and meets some other criteria. "They will be able to choose to take withdrawals from sources that are pre-tax, like a traditional 401(k), or after-tax like a Roth 401(k)," says Snyder. But neither does anyone else. The Battle: Roth 401k vs. So if you don’t qualify for a Roth IRA because your income is above IRS income limits you can make after taxes contributions to a Roth 401(k). This is why it probably doesn’t make sense to contribute to a Roth 401(k) while living in New York City unless you know that you are going to retire in an area with a similarly high taxes. With a Roth 401 (k) you can take advantage of the company match on your contributions, if your employer offers one, just like a traditional 401 (k). The only difference between the two of them was when they paid their taxes, with Kate paying her taxes at the end while Kevin paid his at the beginning. 401(k) vs. Roth 401(k): Which one is better for you? If it is, then you will be paying the same (or higher tax rates) when converting. The 401(k) plan comes in two varieties -- the Roth 401(k) and the traditional 401(k). Sally placed more total dollars into the tax-deferred account to begin with. For example, if you try to convert a traditional 401(k) with a high account balance to a Roth IRA, you may end up in a higher tax bracket than you initially planned for. So it’s a big decision, and a highly personal one, to determine exactly how to go about saving and investing for your future. On the other hand, because no tax was paid on Traditional Solo … "RMDs can have an impact on the taxation of Social Security benefits and Medicare surcharges," says Greenman. Roth IRAs have been around since 1997, while Roth 401 (k)s came into existence in 2001. For disclosure information please see here. When you leave a job, you can rollover your 401k into an IRA at the investment account of your choosing. Any prolonged period of low income (such as spending time to raise your children, going on sabbatical, etc.) "We are experiencing, as a country, some of the lowest tax rates in our history," says Alexander Koury, CFP, of Hosler Wealth Management in Phoenix. You will not have to pay taxes on earnings, interest, dividends, and capital gain. https://www.schwab.com/.../roth-vs-traditional-401-k-which-is-better Given that future tax rates are what’s important when choosing between a traditional 401(k) and a Roth 401(k), your next question might be, “So Nick, what will future tax rates be?”  Unfortunately, I have no idea! While the experts love the Roth 401(k) for its many tax benefits, you’ll have to decide whether that makes sense for your needs and future. "Having money spread out in both pre-tax and Roth accounts gives 'future you' more flexibility to better control your tax bracket in retirement," says Ma. 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