When is saving to a Roth 401(k) a good idea2?
If your current tax rate and your retirement tax rate are likely to be the same, it won’t really matter if you save on a pre-tax basis or a Roth basis. However, if you expect that your taxes in retirement will be higher than what they are now, Roth 401(k) contributions are generally a good idea. Conversely, if your taxes in retirement are expected to be less, then pre-tax contributions are probably better.
Deciding to contribute to a Roth 401(k) may seem like a simple question of, “Do I want to pay more taxes now or later?” However, there are many details to consider. Before starting to save to a Roth 401(k), be sure to read up on the specifics for your employer’s 401(k) and talk to a professional who understands your specific financial situation and goals.