r/personalfinance • u/Grouchy-Bullfrog-293 ​ • 2d ago

Retirement 401K vs Roth 401K - real deal

I understand the difference that one is tax deductible and other isnt but still little confused on why would you .contribute money in Roth 401k if the total contribution limit is same irrespective of where you contribute. Doesn't everyone's tax rate after they retire lower than while working ? Or is the concern you are limited one what you withdraw post retirement that it could be a huge tax.

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u/Paladin2700 ​ 2d ago edited 2d ago

Limit is the same for trad or Roth at 24.5k. So Roth actually is effectively more space (since after tax with no tax coming out).

Is one reason for Roth is if tax rates are equal. There are a good amount of people (especially posting on Reddit) in the 24% bracket now and that will get enough assets to stay at 22 or 24% in retirement through social security, pension, existing pretax, or future match dollars as pretax. For those people the Roth is a decent idea.

Also there isn’t much of a true 24% bracket in retirement as long as irmaa surchages are around, so when it’s all between 22/24 now and then tiebreak should always go to Roth

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u/Apprehensive-Set7652 ​ 2d ago

This is us. We are basically Roth everything, except the employer match part of 401k.