My employer allows new contributions to my 401(k) to go in as Roth (post-tax) or "regular" (pre-tax). What should I consider when deciding how to distribute my contributions between the two?

6 Answers 6


Putting money into a Roth IRA or 401(k) will save you money if your taxes this year will be lower than your taxes in retirement.

  • If you're young and just starting your career, there's a good chance of this in general.
  • Even if you're not, most people are anticipating tax increases in our nation's future
  • If you have a lot of expenses one year, e.g. for medical reasons, you may have to realize a significant amount of income that year, so having it be Roth money instead of regular can help avoid higher taxes.

See also the Wikipedia retirement-savings matrix.


Another consideration is that you are going to wind up with money in the "regular" 401(k) no matter which one you contribute to.

The employer match can't go into the Roth 401(k). So all employer matching funds go in with pre-tax dollars and will be deposited in a normal 401(k) account.

Edit from JoeTaxpayer - 2013 brought with it the Roth 401(k) conversion the ability to convert from the traditional pretax side of your 401(k) account to the Roth side.

  • OP never said he had employer match
    – user102008
    Commented Apr 9, 2013 at 23:23
  • @user102008 - the reference to the match is a detail that may be useful to other readers for whom it might apply. Commented Jul 4, 2013 at 11:01

If you are in the 15% marginal tax bracket, I'd agree, no harm in using Roth. If you are in the 25% bracket or above, it would take quite a bit of savings to retire in a higher bracket. I can't know your entire situation, but the average person is barely saving enough to be in the 15% bracket in retirement, let alone higher.


Also, consider the possibility of early withdrawal penalties. Regular 401k early withdrawal (for non-qualified reasons) gets you a 10% penalty, in addition to tax, on the entire amount, even if you're just withdrawing your own contributions. Withdrawing from a Roth 401k can potentially mean less penalties (if it's been in place 5 years, and subject to a bunch of fine print of course).


As fennec mentioned, it is about your tax rate today vs your tax rate when you retire. One of the big issues is whether you have a lot of tax deductions today that will disappear when you retire, which is likely. These include dependents (aka kids) and your home mortgage. For a person with kids and a mortgage, it seems likely that the Roth would be beneficial.

If you do not have a lot of deductions, you might be ok with the regular 401k to help reduce your tax burden today.

  • "reduce your tax burden" is a meaningless concept. You are giving up more money than taxes you pay by putting it into a retirement account. That extra money could be put into a Roth account instead, and (depending on tax rates) could leave you more money in the end, even though it does not "reduce your tax burden".
    – user102008
    Commented Apr 9, 2013 at 23:26

I would look at it as more of a balance in general assuming you have the ability to contribute pre or post tax money and you expect your retirement tax rate to be about the same.

Pre-tax money gives you flexibility of withdrawal during retirement. Say one year you have unusually high expenses you can pull money from your taxed accounts until you hit the top of your target tax bracket and then pull the rest out of already taxed accounts.

Note that if you have the same tax rate today as when you retire. The traditional account will net you slightly more money, but not a huge amount.

  • Your last paragraph - can you substantiate that? Commented Jul 4, 2013 at 11:02
  • @JoeTaxpayer An example if you are the 25% tax bracket and put money into a ROTH you pay 25% taxes on that money now. If you put the same money in a traditional account today you get 25% back on your taxes but pay the taxes when you retire. Only when you retire your traditional account has the first 12200 exempt from tax, the next ~18k @10%, the following ~50k @15% before hitting your marginal tax bracket of 25%. Numbers assume married filing jointly and that you aren't earning significant taxable income in retirement.
    – stoj
    Commented Mar 21, 2014 at 2:41

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