Q&A: 401: Roth or Regular
How do I determine if a Roth 401k is right for me over a standard 401k? I also have a standard Roth IRA. My employer matches 50 percent in my 401k.
A regular 401k provides participants with a current tax deduction for employee contributions and tax-deferred growth on the assets in the plan. However, when you withdraw, you must pay taxes, at your income rate, on the money taken out of the plan.
Roth 401k contributions are post-tax dollars. You won’t get any current deduction, but the ongoing tax advantage can be huge. All earnings and growth in the Roth 401k are tax-free, forever.
For most serious savers and investors, the tax-free growth of a Roth will probably be preferable as your assets increase. Plus, you can roll a Roth 401k directly into a Roth IRA and avoid the need to tax mandatory withdrawals (the RMD or required minimum distributions associated with both 401k plans and regular IRAs)