Roth 401k vs Regular 401k for young worker
Hello, My son is 33 and is now eligible to enroll in his employer 401k Plan at his new job. The company does not match. He plans to contribute 10% ($6,000 annual) to the plan. Should he contribute to the Roth 401k or Regular 401k (after tax)? We are uncertain how to figure how which is better for hm.
Terry Says
So, it looks like he is earning $60,000 a year (if 10% = a $6,000 contribution). Making it a Roth contribution means he doesn’t get a tax deduction. But in his bracket, a tax deduction isn’t as valuable as the other benefits of a ROTH – -years and years of tax-FREE growth, and (as of this writing) no requirement to start distributions at any specific age.
So I always recommend a Roth to those just starting out. Then all he needs to do is hope the government keeps its promises 40 years from now when he’s ready to retire!
And PS when he next searches for a job, make sure he finds one where the employer matches his contribution! That’s a truly valuable gift over the long run!
