A frequent question I get from 401(k) plan participants is “What type of contributions should I make, Bob: Roth 401(k) contributions or traditional pre-tax 401(k) contributions?” After reading the results of a study that was recently published in The Wall Street Journal, my answer has changed. Making Roth 401(k) contributions appears to be better for everyone.
First, let’s talk about how the two differ. Traditional pre-tax 401(k) contributions are made without deductions for state and federal taxes. Contributions and earnings grow tax-free until they are withdrawn. At distribution, contributions and earnings are taxed at the individual’s state and federal tax rates.
Register or login for access to this item and much more
All Employee Benefit News content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access