To Roth or Not?

Policy Reports | Retirement

No. 314
Wednesday, September 03, 2008
by Laurence J. Kotlikoff

In 2006, the Roth 401(k) plan was introduced as an alternative to regular 401(k)s. Whereas contributions to regular 401(k)s are made with pretax dollars, Roth 401(k) contributions are made with after-tax dollars. When retirees withdraw their funds from regular 401(k)s, the contributions and accumulated earnings are taxable. But since taxes have already been paid on Roth contributions, all of the funds in the Roth account can be withdrawn tax-free. Which type of 401(k) is better?

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