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Retirement Planning: Pre-Tax 401(k)s vs. Roth 401(k)s
When deciding between pre-tax and Roth, it’s important to consider how each option affects your taxes and retirement strategy. A pre-tax 401(k) allows you to make contributions with pre-tax dollars, deferring taxes until withdrawal, which can be beneficial if you expect to be in a lower tax bracket during retirement. On the other hand, a Roth 401(k) involves making contributions with after-tax dollars, enabling tax-free withdrawals in retirement, making it ideal for those who anticipate being in a higher tax bracket when they retire. Understanding these differences can help you make informed decisions that align with your financial goals.
Additionally, your retirement plan may offer you the option to split your contribution so that you can do some pre-tax and some Roth, giving you ultimate flexibility with how you want to contribute.
For complete details on pre-tax and Roth options, see our blog post.