I get how a normal pre-tax 401k works. I'm finally at the point where I am maxing these contributions (and my Roth IRA as well) and I'm looking for more ways to save for the future. Apologies if this is a basic question. I've done some reading and I think I've got this right but I just want to check to make sure I'm maximizing.
My employer offers a traditional 401k, a Roth 401k, and I can make post-tax contributions to my normal 401k as well. As I understand it, the main benefit of a Roth 401k is that both contributions and earnings grow tax free so even though you are paying taxes on the money up front there is no tax in retirement. A post-tax 401k dollar can be withdrawn tax free but the earnings on that dollar are still taxed.
But if I am allowed to just roll my post-tax 401k dollars into my Roth IRA upon leaving the company or retirement then why bother with a Roth 401k? If I do this I am not subject to RMDs and I can still draw my contributions and earnings tax free. This would make it even better than the Roth 401k. Plus I can still max my normal pre-tax 401k for untaxed compounding growth. If this is right I see no reason to put any money into a Roth 401k and instead I should just contribute post-tax dollars on top of my regular 401k (up to the $53k yearly cap) as my income rises over the years. Am I understanding this correctly?
Thanks!
Submitted December 13, 2017 at 11:57AM by Alright_Hamilton http://ift.tt/2AjKFRU
