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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75530  
Subject: Roth 401k vs. traditional 401k Date: 3/17/2014 10:08 AM
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I think this is the right board for this question, but please redirect me if that is not the case.

DD, who is 22 years old and makes just under $40k per year, has just found out that her employer will be adding a Roth 401k to her benefits. She doesn't have the details yet, but has asked me for guidance on what she should do. They already have a 401k, and she contributes enough to get the match.

My employer does not offer a Roth 401k, so I don't know much about them. I am guessing that Roth and standard 401k allow for the same contribution limits, and that the big difference is probably the same as a Roth vs. Traditional IRA in that the Roth is funded with post-tax dollars, grows tax-free, and distributions are tax-free vs. the Traditional IRA which is funded with pre-tax dollars, grows tax-free, and distributions are taxed as ordinary income.

Given that and the fact that she is in a low tax bracket, I am thinking that she will be better served to push all her 401k contributions over to the Roth 401k (assuming she has the same matching) because she most likely will be in a higher bracket later, including in retirement.

Anyone know any more about these? Do I even understand the differences correctly? Anything else that she should be considering?

I'm not knowledgeable in this area, and so do not know how to advise her.
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