Roth vs Traditional Contributions

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To Roth or Not to Roth

I’ve gotten a lot of questions about the value of Roth inside of your retirement plan so I thought I would do a quick video on it. 

So here’s the question, how do you as a 401k or 403b participant, become a 401k superhero to your future self? 

That is the question and these videos will give you the answers.  I’m Jonathon Schultheiss and welcome to the becoming a 401k superhero videos.

Lets talk about the difference between Roth and Traditional in your retirement plan. 

The money you contribute to Roth is after tax dollars and the money you contribute to the Traditional is pre-tax dollars. 

Let me give you an example.  If you contribute $100 into your Roth account, your bring home would go down by $100. 

Now on the other hand, if you contribute $100 into the Traditional account and assuming you’re in a 25% tax bracket, your bring home would only go down by $75. 

So you get a tax savings NOW on the Traditional where you don’t get any savings on the Roth; however, the Roth account is 100% tax free at retirement, assuming you’ve had the account for 5 years and you’re over the age of 59 ½.    

The Roth being 100% tax free is a huge benefit.  All the growth and contributions are tax free.  The Roth becomes even more of an advantage the younger you are.  Because the younger you are and the more years you have for your account to grow, the more tax free money you will have at retirement. 

A simple rule of thumb for Roth is that the younger than 50 you are, the more advantageous it is for you to contribute to the Roth option.   

Einstein said the most powerful thing in the universe is compound interest.  The more years you have for your account to grow and compound, and then become tax free, the more powerful the Roth option is. 

If you have questions on how Roth might work for you, then we should have a conversation.  Click on the link and schedule a time for us to talk about how you can become a 401k superhero to your future self by using the Roth option.