Question

Roth vs. traditional

Can you find any information about whether it is better to use a Roth account or a traditional IRA or 401(k)?

Answer 1

Following is the explaination for Traditional and Roth and the choice to decide.

	Traditional 401K	Roth 401K
Taxes	Contributions in this account are pre-tax When money is withdrawn taxes are paid from 401k	Contributions in this account are post-tax When money is withdrawn from 401k no taxes are paid
Pros	Contributions here, will lower taxable income If you fall under lower tax bracket, this is beneficial Allows for more cash to invest	Unlike traditional, withdrawals here are tax-free Beneficial for low-salaried individuals in low tax bracket Allows a financially efficient platform, if one is over-spender
Cons	Tax is levied on withdrawals Can be efficient, only if the tax refund is re-invested	Tax is levied on contributions Pay checks that you receive monthly will be lower You should take RMDs from Roth 401(k) unlike Roth IRAs

Roth account also offers flexibility: You may withdraw your contributions (not the earnings) without a penalty so you have more access to your money. If you got a long way to go before retirement, and you are concerned about locking away your money for too long and want to be able to get at it if you need it, a Roth is the right option to choose.

Also, as the distribution might begin as early at the age of 59^1/2 or if the individual becomes disabled. But, in Roth it is at the age of 59^1/2 as long as the account is open for 5 years or if the individual becomes disabled.