FINANCIAL FREEDOM COUNTDOWN

ROTH 401(K) VS. TRADITIONAL 401(K) AND WHAT IS THE BEST OPTION

In an ideal world, if tax brackets and income at the time of contribution and withdrawal stay the same, investing in Roth 401(k) vs. traditional 401(k) yields identical results.

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Traditional 401(k) accounts are funded with money on a pre-tax basis, meaning it comes out of your paycheck before you pay any taxes on it.

Your adjusted gross income (A.G.I.) is lowered by the amount you contributed, which could put you in a lower tax bracket.

In a Roth 401(k), you contribute money after paying your taxes. Contributions to the Roth 401(k) also do not reduce your adjusted gross income.

With a Roth 401(k), any matching contributions by your employer are considered pre-tax money. And you pay taxes on the employer contribution and growth.

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If tax brackets and income at the time of contribution and withdrawal stay the same, investing in Roth 401(k) vs. traditional 401(k) yields identical results.

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