Always Take the Roth
Jennifer says her job offers a regular 401(k) and a Roth 401(k). Which should she take?
QUESTION: Jennifer on Twitter says her job offers a regular 401(k) and a Roth 401(k). Which should she take?
ANSWER: Roth, because it grows tax free.
Here’s the thing: If you put X dollars in your 401(k) and you get to retirement and there’s $1 million in there, if it’s a Roth 401(k), the $1 million in there at retirement is tax-free. No taxes. If it’s in a regular 401(k) and you’ve got $1 million in there, you pay taxes on the $1 million, which is going to be $300,000—maybe $400,000 at the rate we’re going. You’re going to lose 30% or 40% of your money in taxes. Make it a Roth. Always make it a Roth. If you’ve got years and years and years to go, which most people do, then make it a Roth. It’s that simple.
My personal 401(k) is a Roth. Definitely. It’s what we do.