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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Fed here. What are the reasons to to Roth 401K vs Pretax?[/quote]

It is simply a gamble on whether or not you believe that the tax rate you pay in retirement will be greater than the tax rate that you pay today. I have been an extremely high income earner my entire life. I have all of my retirement funds in a Roth (about $1.5M at 45). I am betting that my income when I retire will still have my in the highest rate AND that the highest rate will be higher than it was during my lifetime.

I also get the advantage of not having to draw those funds (unlike a 401k which has required minimum distributions beginning at a certain age- 70.5 I think). If it don’t use the Roth funds at all (distinctly possible) they pass to my kids without taxation. [/quote]

Some things there to perhaps amplify a bit.

RMDs for traditional 401k/IRA now start the April after you turn 72.  If the Roth is in a 401k it is subject to RMDs--make sure to convert to a Roth IRA, which are not subject to RMDs, before RMDs kick in.

About higher taxes in retirement.  One issue people often forget is that after one spouse dies, the remaining spouse is now subject to single taxes, which are substantially higher than married filing jointly.  So indeed, even if tax rates don't change, you could find yourself in the highest rate of your life. Roths at least provide tax certainty and, if you are married, benefit from MFJ rates.

[b]Upon death, Roths are part of your estate and depending on size of your estate and your state will be subject to state and/or federal estate taxes.  But here the Roth wins.  Your Roth will be smaller than your 401k (because it is smaller than the 401k by the amount of taxes you paid), so less estate tax will be due. [/b]

For heirs, a Roth is far better.  Both Roth and traditional 401k/IRA have to be all taken out within ten years.  For a Roth, heirs can just let it sit there for ten years growing tax free and take it all out on the last day with no tax due.  If you did that with a traditional 401k/IRA, the tax bill would be enormous.  To avoid this, the heir should be taking out amounts each year to manage the taxes due by avoiding going into a higher tax bracket.  The amounts taken out could be put into a brokerage account, but then they are no longer growing tax free as they would in a Roth.[/quote]

Are you sure?  I thought an estate is defined as something on which an estate tax is potentially due.  Roths are already taxed money so don't think they are part of the deceased estate. Would appreciate a clarification on this.[/quote]

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