Roth 401k vs 401k.

[wjs010]

Did search function. For the Hospitalist employee making good money let’s say 300k+ per year, do you recommend Roth or trad 401k. I feel like my income will be relatively stable. No crystal ball to know whether I’ll be in lower tax bracket. Is it a better idea to just do 401k pre tax and take that savings toward riskier investments? Or is Roth 401k better no matter what? Thanks

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[Fano]

With many politicians wanting to tax everything that moves, I always worry that they'll eventually tax the "wealthy" Roth accounts just like they started taxing Social Security benefits. IMO, I tend to favor tax deductions now over tax breaks that are far in the future and are subject to change.

 

[Professional Student]

I like Roth because I think even when it's not the best mathematical choice, the difference is still typically slim and you can look at a Roth account and know that the balance is all your money. When you look at a traditional account, you've got to subtract future income taxes to get the true worth. Plus, if you die with that account still significant money, very possible for a physician, it will go to your kids without paying any taxes. With a traditional account, your kids will have to withdraw the balance over 10 years and pay income taxes at their top marginal rate. If your kids are already successful at the time of your death, that tax rate could be 30-40% or more. I think Roth has a significant and often-overlooked estate planning benefit, for those that value that.

But I have also heard this great piece of advice: if you don't know whether to choose Roth or traditional, look at it as diversifying your investment and pick both.

 

[Splenda88]

Tax is likely to get higher in the future, so I believe Roth 401k is better. My company only offers Roth 401k for physicians.

 

[Gastrapathy]

The major advantage of Roth 401k over a traditional is that it’s more tax protected space and most people won’t save the difference for taxable investments.