1 Answer

There are 2 things governing the choice between Roth 401K and Traditional 401K:  age and how much income you'd like to shelter from taxes.  I would be inclined to do the Roth if I am young and do not have a hefty tax bill.  Roth is putting away "after tax" money in an investment bucket that can theoretically grow until you retire when you can withdraw you investment tax free.  The problem is that you do not benefit from any tax advantage the year of the contribution.  Traditional 401K contributions are pre-taxed, hence, the amount you contribute will be tax deferred until such time you withdraw after age 59 1/2.  If you anticipate a large tax bill and need the deductions, go for the Traditional 401K. Taxes are recognized the year of the withdrawal.  Both involve 10 % penalty for early withdrawals.