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Reply to "Increased contribution limits in 2023… "
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[quote=Anonymous][quote=Anonymous]Fed here. What are the reasons to to Roth 401K vs Pretax?[/quote] It's pay now vs pay later. Regular 401K: - Get tax reduction now, when you contribute (Amount contributed * (your marginal fed tax rate+your marginal state tax rate)). - Con: You will have to pay prevailing tax rates on withdrawal (you could minimize it if you move to a low/no-tax state or to a state that does not tax retirement withdrawals) - Con: you are forced to withdraw at a certain age (RMD) Roth 401k: - You higher taxes now (on the contribution). - No forced withdrawal anytime (if you convert the Roth 401K to a Roth IRA) - No tax on withdrawal. Assign values to each of the above and find your sweet spot.[/quote]
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