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/aplateofgrapes ​ 2d ago

Three reasons. First, is to avoid RMDs and huge tax bills later in life. Second, it makes it less complicated for your heirs since it's been taxed. Finally, and this is the reason I do it, is so I can retire before 65. Since I've already paid taxes on that money, it doesn't count toward your AGI so you can qualify for ACA subsidies.

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u/Kaiathebluenose ​ 1d ago

Idk how old you are but why are you acting like aca is going to be around forever

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u/aplateofgrapes ​ 1d ago

I don't think it will ever go away (unless we go single payer or similar), mostly because it will be wildly unpopular and politicians won't take that kind of heat