As an employee of a company you may have access to a 401(k). A 401(k) is an employer-sponsored (offered) retirement plan that allows you to save money for retirement. Sometimes your employer may provide a match based on a percentage of your contributions. Your employer may give you the option of saving to a pre-tax account or a Roth account. A pre-tax contribution means that your contributions are made to your account before federal and state taxes are applied to your paycheck. A Roth contribution means that taxes are taken first, then the contribution goes to your account. This is also known as an after-tax contribution. If you make pre-tax contributions, you avoid tax now, but then are taxed when withdrawals are made in retirement. If you make Roth contributions now, you’re taxed today, but withdrawals in retirement are tax-free. It can make a lot of sense to contribute to your Roth 401(k) for a few reasons.
Personally, I favor Roth contributions. I like the tax-free benefit of qualified distributions in retirement. It should be noted however, that any employer match to a Roth 401(k) will be made to a pre-tax account (as the employer is allowed a tax deduction for the matching contribution). Your employer match will not be Roth dollars. This should not be a discouragement from saving to your Roth 401(k). The post Roth or Pre-Tax 401(k)? appeared first on Getting Your Financial Ducks In A Row. Related posts:Via http://feedproxy.google.com/~r/GettingYourFinancialDucksInARow/~3/wVsrhSqeKmw/
0 Comments
Leave a Reply. |
AuthorHi I am Evelina Bryant , I am 32 years old from Big Bear Lake, CA. I am woring as a financial analyst with local financial services company. ArchivesNo Archives Categories |