When to Save for Retirement in a Roth 401(k)- Wall Street Journal – 05/18/19

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When to Save for Retirement in a Roth 401(k)

Many workers now have the opportunity to contribute to a Roth plan alongside a traditional 401(k). But lots of people who would benefit from picking that option aren’t doing so.

Fewer than 15% of workers who have access to Roth 401(k) plans put money into them, according to separate surveys conducted by Vanguard Group and Alight Solutions. By contrast, the participation rate for traditional 401(k) retirement plans is often 80% or more, according to spokesmen for Vanguard and Alight.

Many workers now have access, as the number of companies offering a Roth 401(k) has surged recently. Vanguard estimates that 71% of the traditional 401(k) plans it administered in 2018 included a Roth 401(k) option, compared with 37% in 2009.

When is it smart to opt for a Roth 401(k)? Finance specialists cite this rule of thumb: If a saver expects a higher federal and state tax rate at withdrawal than when the money was put in, a Roth account is better.

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