How the Roth 401K is Your Secret Tool for Tax-Free Retirement Growth

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Hi, this is Antwone Harris with Platinum Bridge Wealth Strategies. Many people ask me if they should participate in their company's Roth 401k option and it really depends. So, conventional wisdom says that if you're young in your career, you're not making a ton of money. You're in a relatively low tax bracket that a Roth 401k is a no brainer, right? If you're adding to a traditional 401k, every dollar goes in pre taxed. You're lowering your taxable income. You get a tax break now with a traditional 401k, but you pay taxes on every dollar that comes out of that 401k, later. There's a concept called tax diversification, which is really important when we're trying to minimize taxes for you in retirement and throughout retirement for the rest of your life. The concept of a Roth 401k is essential in promoting this tax diversification because you're going to forego the tax break now- you contribute after tax dollars to this Roth 401k. You have to pay taxes now before you contribute. However, you don't pay taxes at the end of the day. Say if we can get $10,000 in a Roth 401k and we can expand the runway, meaning that we earmarked that account toward the end of your life.We can allow that money to compound over several years, even decades. You forego a tax break on say $10,000 now, perhaps that account grows to 20, 30, 40, 50, 60, even $70,000 in the future and then you're pulling that money out tax free. When we go to give you money in retirement, or even if you're a person without long term care insurance, we may say, okay, we're going to self insure for long term care. This is a great account to use for end of life expenses. From a tax perspective, a Roth 401k is a great tool. Remember that you're able to contribute irrespective of how much money you make. With a Roth IRA account, there's an income limit. You're not able to contribute after a certain amount of income. Within a Roth 401k, even if you make over a million dollars a year, you're able to use that Roth 401k. The answer depends, but it's a great tool. If your company offers a Roth 401k, you should talk to your financial advisor about whether it makes sense for your plan. Within a couple of years, all companies are going to be required to offer a Roth 401k. I think it's definitely something to consider and if you have any questions, please let me know. This is Antwone Harris with Platinum Bridge Wealth Strategies. I'll talk to you soon.