Question : Is a roth 401k better than a regular 401k plan for a 21 year old? I dont know anything about retirement plans
Is a roth 401k better than a regular 401k plan for a 21 year old? I dont know anything about retirement plans. But the lady giving the presentation at my work said roth 401k would be better for my age but I dont see how. Also my company will match up to 5% any tips I should consider?
- asked by John S
All Answers:
Answer #1
Yes, the ROTH is better at your age. You areprobably in the lowest tax bracket you will everbe, so it makes sense to pay taxes on the moneyand then withdraw it TAX FREE when youretire.There is no guaranty that tax rates ingeneral won't be higher 40 years from now, so evenif you are in a middle tax bracket, it probablystill makes sense.I wish my company offered a ROTH401(k). I put into my company's regular 401(k)and then also put into a separate ROTH IRA.
- answered by Rick B
Answer #2
I agree with her as well. A ROTH is better andhere is why:When you deposit money PRE-tax (like atradition roth account), then Uncle Sam needs toget his money at some point which is when youretire. So say you put in $100 when you are 21pre-tax. You normally would have paid like $15 toUncle Sam, but you did it pre-tax, so you paid himnothing. Now, after 40 years of growth - your$100 is now $1000. But, since you are nowwithdrawing that money at retirement, you payUncle Sam off of the $1000 ... say $200.. insteadof paying him at the beginning that measley $15.Ina Roth, you pay taxes up front. So all your moneygrows tax free!!! It is great! That is the wholereason the feds put a cap on the Roth - at$4000/per year last I checked. Otherwise, everyother rich person would be throwing money into it.
- answered by hamsterbabies
Answer #3
Absolutely Roth IRA...you will not pay taxes onthe interest earned. Long story short, you willhave more cash for retirement as opposed to atraditional IRA. I agree w/the aboveopinions..Congrats on starting saving young!
- answered by WINO
Answer #4
I concur whole-heartedly with the responsesstating that the Roth is better due to its pre-taxstatus. By the way, if you take $1000 and sink itinto an investment making 12% within a Roth IRA,then add $100 a month to it, it turns into$1,775,093.54 when you are 65. Not bad.
- answered by Debt Is Dumb
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