Here's Why a Roth 401(k) Offers Incredible Tax Savings in Retirement
Roth 401(k) accounts provide great tax benefits to retirees, but not everyone takes full advantage of these savings. These accounts combine attractive features of some of the higher-profile alternatives. Consider the following features and perks to get the most out of your retirement plan.
Roth IRAs are popular because they eliminate taxes on returns in a retirement account. The embedded tax liability can get rather large as assets grow in other types of accounts. The Roth 401(k) doesn't get as much press as its IRA cousin, but it provides the exact same benefit.
Roth contributions are made after taxes. They won't offer any upfront tax benefit, but they are still a powerful vehicle for long-term accounts that deliver significant returns over the year. Qualifying distributions from a Roth 401(k) aren't subject to capital gains or income tax. In contrast, withdrawals from a traditional IRA or 401(k) are taxed as ordinary income. A regular brokerage account is subject to capital gains as positions are closed.
Source Fool.com
