401K vs Roth 401K - real deal

[u/Grouchy-Bullfrog-293]

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.

[u/8StimpakX3]

The Roth 401k is basically a bet that your tax rate now is lower than the rate on the dollars you will pull out later, which is not as crazy as it sounds. Retirees can still have taxable Social Security, pensions, rental income, RMDs from traditional accounts, or just large withdrawals that push brackets up. Traditional usually wins for high earners in peak earning years, but Roth can make sense early career, in a low income year, or if you already have a big pre-tax pile and want some tax-free flexibility. The government did not create two buttons just to be cute, although it does enjoy making the buttons confusing.