Starting in January 2008 my company will offer both a Roth 401k and regular 401K option for retirement. 7% percent match will occur for both the Roth 401K and/or the regular 401K. I've been contributing to the regular 401K for 5 years (balance over 100K). Should I switch to the Roth 401K format? I'll lose the tax deferred savings but gain potential tax shelter at time of retirement (depending on my tax bracket). Any advice? Thanks!

I don't know... what do you think?

For the search impaired:Link

Kera, the answer is it depends....

Not trying to be a smart A$$ but if you think you are in a higher tax bracket now stay in the regular 401k and pay the lower tax rate at retirement when you use the money. If you think your taxes will be higher when you retire go with the ROTH 401k and pay the lower rate taxes now. If the tax rate is the same there is very little difference.

My employer toyed with the idea of the ROTH 401k, but ultimately decided not to due to the added complexity and having to educate the workers about the differences. There could be liability there if your employees do not understand and later decide to sue you.

The ROTH 401K does have an advantage if you are maxing it out. The limit for each is the same dollars ($15500 for 07/08 if you are under 50). But $15.5k invested after taxes is effectively more than $15.5k pre tax. This contribution limit is a total, that is you can put money in both a 401k and ROTH 401k, but the total can't be more than $15.5k.

Also if your employer does match the first 7% of your contribution. This match money is always pre-tax money and has to go into the regular 401k no matter which plan you contributed to.

If you search under Roth IRA you will find the same type of discussion that should give you some help.

Hope I was of some help and welcome to Fatwallet

Cheers
Wizard83

Hey Jimmi, thanks for posting the link. However, the link you posted is for Roth 401k and IRA, whereas the originator was asking about Roth 401k vs. Traditional. just an FYI