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Financial Planning / Foolish 401(k)s


Subject:  Re: Switch From a Roth 401k to a Traditional 401 Date:  12/23/2012  12:17 PM
Author:  Fuskie Number:  24973 of 26128

Congratulations on your first board post! You were such a smart young person to begin investing at age 22. As your story demonstrates, you are just getting started with your earning power over the future decades. Your tax liability will most likely increase with your growing compensation and increasing tax rates. So the money that you invest in a Roth IRA and a Roth 401k now, when your tax liability is lower than it is expected to be in 30-40 years, will reduce your tax liability in retirement where distributions would be tax free. Plus, you can withdraw your original contributions from the IRA at any time tax and penalty free (though I recommend letting your investments continue to work for your retirement).

Who sees the only benefit of a Traditional 401k to be the current year tax deduction which provides temporary tax relief at the expense of future liabilities, which could also be achieved through other itemized deductions...
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